What are the terms of the contract? Flashcards
What are the main 6 points of interpreting the contract addressed in the video?
- Words of the parties govern the contract.
- Parol Evidence.
- Parties Conduct.
- Warranties.
- Limitation on Remedies.
- Risk of Loss.
What is the basic idea of parol evidence rule?
If there is a final written agreement, then prior or contemporaneous evidence (oral or written) cannot contract, add, or change it.
Does the parol evidence rule apply if there is no final writing?
No. If oral, think statute of frauds, but not parol evidence. “Final writing” triggers parol evidence against prior or contemporaneous evidence.
What is the effect of a merger clause on the parol evidence rule?
Strong evidence that the agreement is the final written agreement and parol evidence cannot be allowed in.
What are the exceptions to the parol evidence rule?
(1) Partial integration. Parol evidence allowed to ADD (only) to the deal. Can’t explain or change.
(2) Defense to formation / defense of enforcement (not contradict the writing). You just want out of the writing.
- Formation Defects (fraud, duress, mistake, illegality).
- Party asserts oral agreement of condition before writing became effective.
(3) Explain a vague term. Not contradiction. Just interpreting and explaining the vague term.
(4) Collateral Agreement (related to Subject matter but not part of primary promise) / Naturall Omitted Terms = (1) doesn’t conflict, (2) concerns subject similarly situates parties would not ordinarly be expected to include.
(5) Correct a clerical error.
(6) Showing “True Consideration:” The parol evidence rule will not bar extrinsic evidence showing the
“true consideration” paid (such as evidence that the consideration
stated in the contract was never paid).
Does UCC 2 allow additional Terms to a final written agreement?
Usually followed parol evidence rule, but providing that
a party can’t contradict a written contract but may add consistent
additional terms unless: (1) there is a merger clause, or (2) the courts
find from all of the circumstances that the writing was intended as
a complete and exclusive statement of the terms of the agreement.
Article 2 also provides that a written contract’s terms may be
explained or supplemented by evidence of course of performance,
course of dealing, and usage of trade—regardless of whether or not
the writing appears to be ambiguous.
General Rules of Contract Construction?
Contracts will be construed as a “whole”;
The courts will construe words according to their “ordinary”
meaning
written or typed provisions
will prevail over printed provisions.
The courts generally will try to reach a determination that a
contract is valid and enforceable.
Ambiguities in a contract are construed against the party
preparing the contract.
The rules of conduct.
What is the heirarchy for contract term interpretation?
- Words rule (express terms first).
- Course of performance - how the parties have previously installments of the CURRENT deal / contracts.
- Course of dealing: Parties’ conduct in prior contracts. (less reliable than course of performance.
- Trade Usage or Trade Custom: Industry norms parties are aware of.
Defines Express warranty and the 2 types of implied warranties.
Express: Seller describes goods, promises facts about goods, shows sample or model. (Doesn’t have to use word “warranty.”) NOT opinion or “puffing” up product.
Implied Warranty of Merchantability: Goods fit for ordinary, foreseeable purpose. If (1) a merchant seller (2) who regularly sales that (3) type of goods, not just a businessman, then “implied by law”is that the goods are at least “fit for ordinary purpose for which such goods are used.”
Implied Warranty of Fitness for Particular Purpose: Facts: (1) Any seller knows (i)of special purpose and (ii) that buyer is relying on their skill and judgment to select goods for that purpose, and (2) buyer in fact does rely.
Merchant or not.
What is the warranty of title?
Any seller of goods warrants that the title transferred is good,
that the transfer is rightful, and that there are no liens or encumbrances
against the title of which the buyer is unaware at the
time of contracting.
This warranty arises automatically and need not be mentioned in the contract.
What is the warranty against infringement?
A merchant seller regularly dealing in goods of the kind sold
also automatically warrants that the goods are delivered free of
any patent, trademark, copyright, or similar claims. But a buyer
who furnishes specifications for the goods to the seller must hold the seller harmless against such claims.
What warranties can be disclaimed?
Implied only.
3 ways to disclaim implied warranties:
(1) magic words of “as is” or “w/all faults,” or
(2) conspicuous disclaimer (so written that a reasonable person would notice it).
If merchantability, but mention merchantability.
(3) By Examination or Refusal to Examine
If the buyer, before entering into the contract, has examined the
goods or a sample or model as fully as they desire or has refused
to examine, there is no warranty as to defects that a reasonable
examination would have revealed.
What is the general rule and exception for limitation of damages clauses?
seller can limit buyer’s remedies for any warranty (even express) as long as limitation is not unconsionable.
Exception: presume that personal injuries for consumer good is per se unconscionable.
What is the general idea for risk of loss?
Issue is that goods are damaged or destroyed before buyer gets them and who bears those risk if neither at fault.
Seller? Must provide new goods at no additional cost or be liable for breach.
Buyer? Pay contract price even though goods are damaged or loss.
