Terms of the K

Question 1

What is the parol evidence rule?

Answer 1

The parol evidence rule states that when parties to an agreement express that agreement in writing, the writing is considered the final expression of the K, therefore any other written or oral expressions made prior to or contemporaneous with the writing are INADMISSIBLE to vary the terms of the writing.

This covers only extrinsic evidence that seeks to vary, contradict, or add to an integration. (Other evidence OK)

Question 2

When is a writing considered the final integration for purposes of the parol evidence rule?

Answer 2

Writing is considered the final integration if it was intended as such. A final integration can be intended as either partial or complete.

Complete - writing cannot be contradicted or supplemented
Partial - Writing may not be contradicted but CAN be supplemented by additional, consistent terms

Under UCC, ALL writings are presumed partial.

Question 3

What is a merger clause? What is its legal effect?

Answer 3

A merger clause states that the writing is intended to be the final, complete K. However, courts will just consider this as one factor in assessing whether a K is complete.

Under UCC, merger clause will prohibit introduction of parol evidence.

Question 4

What evidence falls outside of the scope of the parol evidence rule?

Answer 4

• evidence introduced to prove validity issues (e.g., formation defects - fraud, duress, mistake or conditions precedent to validation of K)
• evidence that is collateral to the written obligation + does not conflict with it
  
  • similarly, naturally omitted terms - i.e. terms that (1) do not conflict with writing and (2) would not ordinarily be expected to be included
• evidence used to help interpret uncertain or ambiguous terms (unless meaning is plain)
• evidence that consideration was paid
• facts to support showing that P is entitled to reformation of K
• evidence of subsequent modifications to K

Question 5

What is the UCC’s version of the parol evidence rule?

Answer 5

Generally the same, i.e. a party may only introduce extrinsic evidence to add terms that are additional and consistent UNLESS:

1. there is a merger clause, or
2. courts find writing intended as complete/exclusive agreement

Also, regardless of whether writing is ambiguous, parties may introduce evidence of performance, trade usage, or course of dealing to help interpret terms.

Question 6

What are the 9 canons of contract construction?

Answer 6

• contracts construed as a whole
• construe words as ordinary meaning
• written/typed > oral
• try to find K valid
• course of dealing/prior transactions relevant
• usage of trade relevant
• course of performance for long term K relevant
• when rules conflict: express terms > course of performance > course of dealing (outside K) > trade usage

Question 7

Under the UCC, what terms are supplied if the following are missing:

• price
• place of delivery
• time for shipment/delivery
• time for payment
• assortment of goods to be delivered, not specific which party chooses

Answer 7

UCC has gap filler provisions as follows:

• reasonable price at time of delivery
• sellers place of biz or home if they don’t have one
• reasonable time
• payment due at time/place buyer is to receive
• buyer’s option (if party who has right to specify never does, then other party can choose themselves or treat this as a breach)

Question 8

What are the possible warranties?

Answer 8

• express warranties
• implied warranty of title
• implied warranty against infringement
• implied warranty of merchantability
• implied warranty of fitness for a particular purpose

Question 9

What qualifies as an express warranty?

Answer 9

Any affirmation of fact or promise made by the seller to the buyer that functions as basis for the bargain. The statement must come at a time that the buyer could have relied in it in making the K. (but buyer need to prove they actually relied, although seller can rebut with evidence that they didn’t)

NOTE: distinguish between an express warranty (e.g. “this computer will be good for. years) and mere sales puffery (e.g., this computer is top notch).

Note: express warranties are v hard to disclaim

Question 10

What is the implied warranty of merchantibility? When does it apply?

Answer 10

The implied warranty of merchantibility is implied in every K for sale by merchant who deals in goods of the kind sold. The warranty guarantees that the goods are fit for the ordinary purpose for which they are used.

Question 11

What is degree of culpability needed to show breach of an implied warranty?

Answer 11

None - standard is strict liability for all implied warranties.

Question 12

What is the implied warranty of fitness for a particular purpose? When does it apply?

Answer 12

When any seller (not just merchant) has reason to know that the (1) buyer plans to use goods for a particular purpose and (2) buyer is relying on seller’s knowledge to select suitable goods and (3) buyer in fact relies on sellers skill to purchase goods – then there is an implied warranty that the goods will be fit for that purpose.

Question 13

What is the warranty of title? How may it be disclaimed?

Answer 13

Any seller of goods warrants that the title transferred is good, transfer rightful, no liens/encumbrances of which the buyer is unaware of.

May be disclaimed by specific language or notice to buyer.

Question 14

What is the warranty against infringement?

Answer 14

A merchant seller regularly dealing in the kind of goods sold implicitly warrants that the goods are delivered free of any patent, trademark, copyright, etc infringement. (Unless buyer provides the specs for goods).

Question 15

How many the implied warranties of merchantibility and fitness for particular purpose be disclaimed?

Answer 15

Merchantibility: specific language (must be conspicuous if in writing)
- under UCC, also with “as is” clauses (no need for conspicuous)

Particular purpose: specifically by conspicuous writing + examination if defects would be revealed by examination + course of dealing/performance/trade usage
- under UCC, also with “as is” clauses (no need for conspicuous)

Note: conspicuous = larger, set off, different type/font/color/etc

Question 16

When must a warranty disclaimer or limitation on remedy be received for it to be effective?

Answer 16

Must be part of the bargaining process, so disclaimers in the box are generally invalid.

BUT: clickwrap terms in installing software are generally OK - can return

Question 17

What damages is P entitled to for breach of warranty?

Answer 17

Generally, the difference in value between goods tendered and original goods measured at time and place of acceptance.

Note: value may be measured at time of dispossession rather than acceptance if there is huge difference in value between the two.

Question 18

What may a buyer do once warranty of title is breached?

Answer 18

Goods are reclaimed by true owner. Buyer can then revoke acceptance and sue on the K. Damages are value of entire K since buyer has no goods.

Question 19

To whom do warranties extend?

Answer 19

Any person in the family or household of the buyer or who is a guest in the home if reasonable to expect they may use the good + person suffers personal injury due to breach.

Question 20

When does risk of loss transfer from seller to buyer when the seller ships nonconforming goods?

Answer 20

• if buyer has right to reject goods, then risk of loss doens’t transfer until goods are accepted or cured
• if the buyer rightfully revokes acceptance, then risk of loss is treated as remaining on seller entire time

Question 21

In valid shipments, when does risk of loss transfer from seller to buyer?

Answer 21

1. Noncarrier cases (i.e., goods moved by parties)
   seller is merchant: risk of loss transfers to buyer when they take physical possessionseller is nonmerchant: risk of loss transfer to buyer when they promise delivery
2. Carrier cases (i.e. goods moved by common carrier)shipment K (requires shipment, not delivery on seller) - risk of loss transfers to buyer when goods are delivered to carrierdelivery K (requires final delivery on seller) - risk of loss transfers to buyer when goods are tendered for delivery

Note: UCC presumes K is shipment K

Question 22

Under a shipment K, what must the seller do?

Answer 22

(1) make reasonable K with carrier (2) deliver goods to carrier (3) promptly notify buyer of shipment (4) provide buyer with docs needed to accept goods

Question 23

What does FOB mean? FAS?

Answer 23

FOB = free on board, followed by name of location means that risk of loss transfer to buyer at the location

FAS = free alongside, means goods shipped by boat - risk of loss passes to buyer once they are on the dock

Note: if K doesnt have explicit FOB/FAS term or allocation of risk of loss it is a shipment K

Question 24

What happens when goods that were identified when the K was made are destroyed (1) without fault of either party AND (2) before risk of loss passes from seller to buyer?

Answer 24

The K is voided - seller’s performance is excused by impossibility/destruction.

Note: If goods were identified after K was made, then the seller would have to prove impractibility to get out of the K.

Question 25

What happens to risk of loss when (a) buyer takes goods for resale and may return them and (b) buyer takes goods for use has right to return goods even if conforming?

Answer 25

(a) same rules of risk of loss, except when the buyer returns goods they keep risk of loss until goods are in transit
(b) risk of loss doesnt pass to buyer until they accept

Question 26

Under Art 2 what property interest do buyers have in goods before receipt?

Answer 26

Buyers have insurable interest in goods once they are identified as goods for K - so that they can get it insured before they have it in possession but after risk of loss may have passed to them.