What are the terms of the contract

Question 1

Parol Evidence Rule - generally

Answer 1

When the parties to a contract express their agreement in a writing with the intent that it embody the final expression of their bargain, the writing is an “integration.” Any other expressions - written or oral - made prior to the writing, as well as any oral expressions contemporaneous with the writing, are inadmissible to vary the terms of the writing.

Question 2

Parol Evidence Rule - is the writing an integration

Answer 2

Two components: 1) whether the writing was intended as the final expression of the agreement; and 2) whether the integration was intended to be complete or parties. Evidence is admissible to show the parties’ intent.

Question 3

Parol Evidence Rule - partial integration

Answer 3

If an integration is complete, the writing cannot be contradicted or supplemented. If, however, the integration is partial, the writing may not be contradicted but may be supplemented by providing consistent additional terms.

The UCC presumes all writings are partial integrations.

A confirmatory memo may be a partial integration under the UCC because it was sent to the other party and that party was aware of its contents.

Question 4

Parol Evidence Rule - effect of merger clause on integration

Answer 4

A merger clause recites that the agreement is the complete agreement between the parties. The presence of a merger clause is usually determinative in large commercial contracts. For most other contracts, the modern trend is to consider it as one factor in determining integration.

Question 5

Parol Evidence Rule - evidence outside scope of PER

Answer 5

Because the rule prohibits admissiblity only of extrinsic evidence that seeks to vary, contradict, or add to an “integration” other forms of extrinsic evidence may be admitted if they won’t bring about this result. That is, they will fall outside the scope of the PER.

Question 6

Parol Evidence Rule - evidence outside scope of PER - validity issues

Answer 6

A party to a written contract can attack the agreement’s validity. The party acknowledges that the writing reflects the agreement, but asserts most frequently that the agreement never came into being because of:

Formation defects (like fraud, duress, mistake, and illegality) may be shown by extrinsic evidence

Conditions precedent to effectiveness: if a party asserts that there was an oral agreement that the written contract would not become effective until a condition occurred, all evidence of the understanding may be offered and received.

Question 7

Parol Evidence Rule - evidence outside scope of PER - collateral agreements and naturally omitted terms

Answer 7

Pearl evidence is often said to be admissible if the alleged parole agreement is collateral to the written obligation meaning related to the subject matter, but not part of the primary promise, and does not conflict with it. The rest statements of contracts include a similar concept with a more definitive approach: the naturally omitted terms doctrine. The doctrine allows evidence of terms that would naturally be omitted from the written agreement. A term would naturally be omitted if one it does not conflict with the written integration and two it concerns, a subject that similarly situated parties would not ordinarily be expected to include in the written instrument. 

Question 8

Parol Evidence Rule - evidence outside scope of PER - interpretation

Answer 8

If there is uncertainty or ambiguity in the written agreements, terms or dispute as to the meaning of those terms, parole evidence can be received to aid the factfinder in reaching a correct interpretation of the agreement. However, if the meaning of the agreement is plain, parole evidence is inadmissible. 

Question 9

Parol Evidence Rule - evidence outside scope of PER - showing of ‘true consideration’

Answer 9

The parole 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. 

Question 10

Parol Evidence Rule - evidence outside scope of PER - reformation

Answer 10

If a party to a written agreement alleges facts, for example mistake, entitling him to reformation of the agreement, the parol evidence role is inapplicable. 

Question 11

Parol Evidence Rule - evidence outside scope of PER - subsequent modifications

Answer 11

Parol evidence can be offered to show subsequent modifications of a written contract. 

Question 12

Parol Evidence Rule - evidence outside scope of PER additional terms under Art 2

Answer 12

Article 2 generally follows the rules discussed above, 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 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. 

Question 13

General Rules of Contract Construction - contracts will be construed as a whole

Answer 13

Contracts will be construed as a whole, specific clauses will be subordinated to the contracts general intent. 

Question 14

General Rules of Contract Construction - ordinary meaning

Answer 14

The courts will construe words according to their ordinary meeting, unless it is clearly shown that they were meant to be used in a technical sense 

Question 15

General Rules of Contract Construction - written or typed over printed

Answer 15

If provisions appear to be inconsistent, written or typed provisions will prevail over printed ones 

Question 16

General Rules of Contract Construction - try to make it valid and enforceable

Answer 16

The court generally will try to reach a determination that a contract is valid and enforceable 

Question 17

General Rules of Contract Construction - ambiguities construed against drafter

Answer 17

Ambiguities in a contract are construed against the party preparing the contract, absent evidence of the intention of the parties 

Question 18

General Rules of Contract Construction - course of dealing

Answer 18

The parties’ course of dealing –> meaning the sequence of conduct concerning previous transactions between the parties to a particular transaction that may be regarded as establishing a common basis of their understanding. 

Question 19

General Rules of Contract Construction - trade usage

Answer 19

Usage of trade –> meaning a practice or method of dealing regularly observed in a particular business setting so as to justify an expectation that it will be followed in the transaction in question. 

Question 20

General Rules of Contract Construction - course of performance

Answer 20

The parties’ course of performance –> meaning if a contract involves repeated occasions for performance by either party, and the other party has the opportunity to object to such performance, any course of performance accepted or acquiesced to is relevant and determining the meaning of the contract. 

Question 21

General Rules of Contract Construction - when rules conflict

Answer 21

Express terms are given greater weight than course of performance, course of dealing, and usage of trade.

Course of performance is given greater weight than course of dealing or usage of trade

Course of dealing is given greater weight than usage of trade

Question 22

Article 2 provisions on interpreting contracts - supplemental (gap-filler) terms - price

Answer 22

If: 1) nothing has been said as to price; 2) the price is left open to be agreed-upon by the parties and they fail to agree; or 3) the price is to be fixed in terms of some standard that is set by a third-party or agency, and it is not set, then the price is a reasonable price at the time for delivery. 

Question 23

Article 2 provisions on interpreting contracts - supplemental (gap-filler) terms - place of delivery

Answer 23

If the place of delivery isn’t specified, the place usually is the seller’s place of business if they have one. Otherwise, it’s the seller’s home. 

Question 24

Article 2 provisions on interpreting contracts - supplemental (gap-filler) terms - time for shipment or delivery

Answer 24

Is the time for shipment of delivery isn’t specified, shipment or delivery is due within a reasonable time.

Question 25

Article 2 provisions on interpreting contracts - supplemental (gap-filler) terms - time for payment

Answer 25

If the time for payment isn’t specified, payment is due at the time and place at which the buyer is to receive the goods.

Question 26

Article 2 provisions on interpreting contracts - supplemental (gap-filler) terms - assortment

Answer 26

If a contract provides that an assortment of goods to be delivered, for example, shirts in various colors and sizes, and doesn’t specify which party is to choose, assortment is at the buyer’s option. If the party who has the right to specify the assortment doesn’t do so seasonally, the other party is excused from any resulting delay and may either proceed in any reasonable manner, like choosing a reasonable assortment, or treat the failure as a breach. 

Question 27

Article 2 provisions on interpreting contracts - warranties - express warranties - generally

Answer 27

Any affirmation of fact or promise made by the seller to the buyer, any description of the goods, and any sample or model, creates an express warranty if the statement, description, sample, or model is part of the basis of the bargain.

For it to be part of the basis of the bargain, it need only come at such a time that the buyer could have relied on it when they entered the contract. The buyer does not need to prove that they actually did rely, although the seller may negate the warranty by proving that the buyer as a matter fact, did not rely. It isn’t necessary that the seller intended the affirmation of fact, description, model, or sample to create a warranty.

Question 28

Article 2 provisions on interpreting contracts - warranties - express warranties - statements of value of opinion

Answer 28

A statement relating merely to the value of the goods, or a statement reporting to be only the seller’s opinion or commendation of the goods, doesn’t create an express warranty. 

Question 29

Article 2 provisions on interpreting contracts - warranties - implied warranty of merchantability

Answer 29

Implied in every contract for sale by a merchant who deals in the goods of the kind sold, there is a warranty that the goods are merchantable. To be merchantable, goods must at least be fit for the ordinary purpose for which the goods are used.

As an all implied warranty cases, it makes no difference that the seller didn’t know of the defect or that they couldn’t have discovered it. Implied warranties aren’t based on negligence, but rather an absolute liability that is imposed on certain sellers. 

Question 30

Article 2 provisions on interpreting contracts - warranties - implied warranty of fitness for a particular purpose

Answer 30

A warranty will also be implied in a contract for the sale of goods whenever 1) any seller, merchant or not, has reason to know the particular purpose for which the goods are to be used, and that the buyer is relying on the seller’s skill and judgment to select suitable goods; and 2) the buyer relies on the seller’s skill or judgment. 

Question 31

Article 2 provisions on interpreting contracts - warranties - warranty of title

Answer 31

Any seller of goods warrants that the title transferred is good, that the transfer is rightful, and that there are no liens and conferences 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. 

Question 32

Article 2 provisions on interpreting contracts - warranties - warranty against infringement

Answer 32

A merchant seller regularly dealing in goods of the time 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. 

Question 33

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - warranty of title

Answer 33

The title warranty can be disclaimed or modified only by specific language or by circumstances that give the buyer notice that the seller does not claim title or that they are selling only such rights as they or a third-party may have. 

Question 34

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - implied warranties

Answer 34

The implied warranty of merchantability and fitness for a particular purpose can be disclaimed by either specific disclaimers or general methods of disclaimer. 

Question 35

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - merchantability

Answer 35

The warranty of merchantability can be specifically disclaimed or modified only by mentioning merchantability. If the sales contract is in writing, the disclaimer must be conspicuous. 

Question 36

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - FFPP

Answer 36

The warranty of Fitness for a particular purpose can be specifically disclaimed only by a conspicuous writing. A written disclaimer is sufficient if it says, for example, there are no warranties which extend beyond the description of the face hereof.

Question 37

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - “conspicuous” definition

Answer 37

A term is conspicuous when it is so written, displayed, or presented that a reasonable person against whom it is to operate ought to have noticed it. Language in the body of a writing is conspicuous if it is in larger type in the surrounding text, contrasting type font or color, or if it is set off from the text by marks that call attention to it. The court, not the jury, decides any question as to conspicuousness.

The UCC also provides several more general methods for displaying implied warranties. 

Question 38

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - by “as is” or similar language

Answer 38

Unless the circumstances indicate otherwise, the implied warranty use of merchantability and fitness can be disclaimed by expression, such as “as is”, “with all faults”, or other expressions that in common understanding, call the buyer’s attention to the fact that there are no implied warranties. Althought this type of disclaimer does not have to be conspicuous, hidden or fine print disclaimers of this type are not effective. 

Question 39

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - by examination or refusal to examine

Answer 39

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

Question 40

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - by course of dealing

Answer 40

Implied warranties may also be disc, climbed by the course of dealing, course of performance, or trade usage. 

Question 41

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - express warranties

Answer 41

The UC provides that words or conduct relevant to the creation of express warranties and words or conduct tending to negate such warranty, shall wherever possible be construed as consistent with each other, but negation or limitation is an operative to the extent that such construction is unreasonable. In other words, once an express warrant is made, it is very difficult to disclaim. 

Question 42

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - limitations on damages

Answer 42

Parties may include in their contract a clause limiting the damages available in the case of breach of warranty. However, such a limitation won’t be held if it’s unconscionable. Moreover, warranty disclaimers that limit damages for personal injury caused by a breach of warranty on consumer goods are prima facia unconscionable.

Question 43

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - timing

Answer 43

To be effective, a disclaimer of warranty, or limitation on remedies must be agreed to during the bargaining process. Thus, although a few core told otherwise, most told that of warranty, disclaimer or limitation on remedy included inside the packaging of goods is not affective against the buyer.

However, computer software often comes with terms that appear on the users, computer screen during the installation process, and the purchaser must click to agree to the terms before installing. Such limitations and disclaimer is typically upheld on the rationale that the purchaser can return the software if they disagree with the conditions. 

Question 44

Article 2 provisions on interpreting contracts - warranties - disclaimer of warranties - unconscionability

Answer 44

Some courts will, in addition to determining whether disclaimers have met the formal requirements discussed above, test warranty, disclaimers by the unconscionability standards. 

Question 45

Article 2 provisions on interpreting contracts - warranties - buyer’s damages for breach of warranty - generally

Answer 45

Generally, the measure of damages for breach of any warranty is the difference between the value of the goods accepted and the value of the goods as warranted, measured at the time and place of acceptance. If there are special circumstances, damages may be measured differently to account for those circumstances. In addition, the buyer can recover appropriate incidental and consequential damages. 

Question 46

Article 2 provisions on interpreting contracts - warranties - buyer’s damages for breach of warranty - breach of warranty of title

Answer 46

If the warranty of title is breached, the goods are reclaimed by the true owner or lienholder, thus dispossessing the buyer. The buyer may then resend the contract, revoke acceptance of the goods, or sue for damages. The value of the good accepted is deemed to be nothing, so the damages are the value of the goods as warranted. Often, but not always, that’s the same as the purchase price. 

Question 47

Article 2 provisions on interpreting contracts - warranties - buyer’s damages for breach of warranty - breach of warranty of title- special circumstances

Answer 47

If there is a special circumstances, the value of the goods is measured at the time of the disposition rather than at the time of acceptance. Agreed, appreciation or depreciation in the value of the goods from the time of delivery until this possession is usually considered a special circumstance. 

Question 48

Article 2 provisions on interpreting contracts - warranties - to whom do warranties extend?

Answer 48

UCC section 2-318 provides alternative provisions for determining to whom warranty liability extends beyond the initial buyer. Most have adopted the narrowest provision, Alternative A, which provides that the sellers warranty liability extends to any natural person who is in the family or household of the buyer or who is a guest in the buyers home if it is reasonable to expect that the person may use, consume, or be affected by the goods and that person suffers personal injury because of a breach of warranty.

Question 49

Article 2 provisions on interpreting contracts - delivery terms and ROL - effect of breach on risk of loss - defective goods

Answer 49

If the buyer has a right to reject the goods, the risk of loss doesn’t pass to the buyer until the defects are cured, or the buyer accepts the goods in spite of their defects. Know that a buyer generally has the right to reject for any defect. 

Question 50

Article 2 provisions on interpreting contracts - delivery terms and ROL - effect of breach on risk of loss - revocation of acceptance

Answer 50

If the buyer rightfully revokes acceptance, the risk of loss is treated as having rested on a seller from the beginning to the extent of any deficiency in the buyers insurance coverage.

Because of these rules, if the goods are non-conforming, the risk of loss remains on the seller.

Question 51

Article 2 provisions on interpreting contracts - delivery terms and ROL - noncarrier case

Answer 51

A non-carrier case is a sale in which it appears that the parties did not intend that the goods would be moved by a common carrier. And such a case, if the seller is a merchant, risk of loss passes to the buyer only when they take physical possession of the goods. If the seller is not a merchant, risk of lost passes to the buyer upon tender of delivery, meaning they are told where it is and how to get it. 

Question 52

Article 2 provisions on interpreting contracts - delivery terms and ROL - carrier case - shipment contract

Answer 52

If the contract authorizes or requires the seller to ship the goods by carrier, but does not require them to deliver the goods at a particular destination, it is a shipment contract and risk of loss passes to the buyer when the goods are delivered to the carrier. In the absence of a contrary agreement, article 2 presume a contract is a shipment contract. 

Question 53

Article 2 provisions on interpreting contracts - delivery terms and ROL - carrier case - sellers’ duties under shipment contract

Answer 53

In a shipment contract, the seller must: 1) make a reasonable contract with the carrier on behalf; 2) deliver the goods to the carrier; 3) promptly notify the buyer of the shipment; and 4) provide the buyer with any documents needed to take possession of the goods.

Question 54

Article 2 provisions on interpreting contracts - delivery terms and ROL - carrier case - destination contracts

Answer 54

If the contract requires the seller to deliver the goods at a particular destination, the risk of loss passes to the buyer when the goods are tendered to the buyer at the destination.

Question 55

Article 2 provisions on interpreting contracts - delivery terms and ROL - carrier case - common delivery terms (FOB and FAS)

Answer 55

FOB: if followed by a city name of the buyer or any other city other than the seller’s it is a destination contract, if FOB is followed by the seller city it is a shipment contract. 

FAS: the term is generally used only when goods are to be shipped by boat. Risk of loss passes to the buyer once the goods are delivered to the dock. 

Question 56

Article 2 provisions on interpreting contracts - delivery terms and ROL - risk in sale or return and sale on approval contracts - sale or return

Answer 56

For the purpose of determining the risk of loss, a sale or return contract, meaning the buyer takes goods for resale, but may return them if they are unable to resell the goods, is treated as an ordinary sale and the above rules apply. If the goods are returned to the seller, the risk remains on the buyer while the goods are in transit.

Question 57

Article 2 provisions on interpreting contracts - delivery terms and ROL - risk in sale or return and sale on approval contracts - sale on approval

Answer 57

In a sale on approval, meaning the buyer takes goods for use, but may return them even if they can form to the contract, the risk of loss is not pass to the buyer until they accept.

Question 58

Article 2 provisions on interpreting contracts - delivery terms and ROL - goods destroyed before risk of loss passes

Answer 58

Exam favorite

If girls that were identified when contract was made or destroyed 1) without fault by either party and 2) before the risk of lost passes to the buyer, the contract is avoided meaning the sellers performance is excused. If the good were not identified until after the contract is made, the seller in the situation would have to prove impracticability. 

Question 59

Article 2 provisions on interpreting contracts - insurable interest and identification

Answer 59

A buyer of embarrassed the risk of loss before receiving the goods purchased. To aid buyers in the situation article 2 gives buyers a special property interest in goods as soon as they are identified as the ones that will be used to satisfy the contract. The special property interest is insurable.

Question 60

Article 2 provisions on interpreting contracts - bilateral contracts formed by performance

Answer 60

Remember that a contract may be formed by the parties performance where the mirror image rule isn’t satisfied and under certain circumstances under article to battle of the forms provision. In such cases, under article 2, the contract includes all of the terms on which the writings of both parties agree. Any necessary missing terms are filled in by the supplemental terms provided for an article 2.

This is different from the common law rule where contracts include the terms of the last communication sent to the party who performed. (Last shot rule)