WHAT ARE THE TERMS OF THE AGREEMENT

Question 1

Trade & Custom Rule

Answer 1

• In order to bind a party by a usage in the trade, it must be shown either that the party had actual knowledge of the existence of the trade usage or that the usage is so well established as to justify a finding of constructive knowledge

Question 2

Parol Evidence Rule

Answer 2

• Rest. 213: Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule)
  1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them [i.e., cannot contradict the final writing – merely supplementing ok]
  2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope. [i.e., cannot even supplement – writing is the final say re parties’ communications]
  ○ What is “integrated agreement”? “An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement.” (see Rest. 209; Town Bank).
  ○ No integration, no parol evidence problem (all evid. comes in).
  ○ Effect of merger clause?
  ○ (p. 497) “An unambiguous merger or integration clause demonstrates that the parties intended the contract to be a final and complete expression of their agreement.”

-fraud . . . illegality, duress, mistake, or insufficiency of consideration are among the well-recognized exceptions to the parol evidence rule

Question 3

UCC 2-202 Final Written Expression/Parol Evidence

Answer 3

Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented

   (a) by course of performance, course of dealing, or usage of     trade           (Section 1-205 1-303) or by course of performance (Section     2-208);     and
(b) by evidence of consistent additional terms [i.e., from     parties’ prior agreements or discussions] unless the court finds the     writing to have been intended also as a complete and exclusive     statement [i.e., merger clause] of the terms of the agreement.
(a) A “course of performance” is a sequence of conduct between the parties to a particular transaction that exists if:
	(1) the agreement of the parties with respect to the transaction     involves repeated occasions for performance by a party; and
	(2) the other party, with knowledge of the nature of the     performance and opportunity for objection to it, accepts the     performance or acquiesces in it without objection. [current K     between the parties]
(b) A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. [previous K’s between the parties]
(c) A “usage of trade” is any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question….  [everyone in the industry]
(d) A course of performance or course of dealing . . . or usage of trade . . . is relevant in ascertaining the meaning of the parties' agreement, may give particular meaning to specific terms of the agreement, and may supplement or qualify the terms of the agreement. . . . 
(e) . . .  the express terms of an agreement and any applicable course of performance, course of dealing, or usage of trade must be construed whenever reasonable as consistent with each other. If such a construction is unreasonable:

Question 4

Implied Terms/ Good Faith

Answer 4

• We believe the better view to be that such subject to financing clauses impose upon the buyers an implied condition to make a reasonable and good faith effort to satisfy the condition
  * Where a contract confers on one party a discretionary power affecting the rights of the other, a duty is imposed to exercise that discretion in good faith and in accordance with fair dealing
  * The general rule regarding the covenant of good faith is plainly subject to the exception that the parties may, by express provisions of the contract, grant the right to engage in the very acts and conduct which would otherwise have been forbidden by an implied covenant of good faith and fair dealing

Question 5

Implied Warranty Of Merchantability

Answer 5

Implied Warranty of Merchantability (UCC 2-314)

(1) Unless excluded or modified (Section 2-316), a warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind. Under this section the serving for value of food or drink to be consumed either on the premises or elsewhere is a sale.
(2) Goods to be merchantable must be at least such as
	(a) pass without objection in the trade under the contract description; and
	(b) in the case of fungible goods, are of fair average quality within the description; and (c) are fit for the ordinary purposes for which such goods     are used

Question 6

Fitness For a Particular Purpose

Answer 6

Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller’s skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose

Question 7

Exclusion or Modification of Warranties UCC-2-306

Answer 7

(1) Words or conduct relevant to the creation of an express warranty and words or conduct tending to negate or limit warranty shall be construed wherever reasonable as consistent with each other; but subject to the provisions of this Article on parol or extrinsic evidence (Section 2-202) negation or limitation is inoperative to the extent that such construction is unreasonable.
(2) Subject to subsection (3), to exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that “There are no warranties which extend beyond the description on the face hereof.”
(3) Notwithstanding subsection (2)
(a) unless the circumstances indicate otherwise, all implied warranties are excluded by expressions like “as is”, “with all faults” or other language which in common understanding calls the buyer’s attention to the exclusion of warranties and makes plain that there is no implied warranty; and
(b) when the buyer before entering into the contract has examined the goods or the sample or model as fully as he desired or has refused to examine the goods there is no implied warranty with regard to defects which an examination ought in the circumstances to have revealed to him; and
(c) an implied warranty can also be excluded or modified by course of dealing or course of performance or usage of trade.