Terms of the Contract Flashcards

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1
Q

What is the Parole Evidence Rule?

A

Prior written or oral, and contemporaneous oral expressions, that contradict, modify, or vary contractual terms are inadmissible if the written contract is intended as a complete and final expression of the parties.

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2
Q

Under the Parole Evidence Rule, what is a Merger clause?

A

A clause in a contract stating that the written agreement represents the complete and final expression of the parties.

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3
Q

Under the Parole Evidence Rule, why is a Merger clause important within a contract?

A

It strengthens the presumption that the written document is final.

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4
Q

Under Parole Evidence, what is a common test used when one party wants to bring in a term?

A

If the parties normally would have included the term (or provision) in the contract but did not, then the term will not become part of the contract.

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5
Q

Does the Parole Evidence Rule apply to subsequent (future) dealings or future Modifications to the contract?

A

No, only prior and contemporaneous (same time) dealings.

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6
Q

What are the four exceptions to the Parole Evidence Rule?

A

1) Ambiguity 2) Formation defenses such as: Fraud/Misrepresentation, Duress, Mistake, Illegality or Incapacity 3) a condition precedent to the contract having any legal effect 4) course of performance, course of dealing, or usage and trade that may explain or supplement the evidence.

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7
Q

What UCC codes deal with Acceptance with Additional terms?

A

2-207 (1) and 2-207 (2)

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8
Q

Under 2-207(2), as between merchants, an additional term(s) in acceptance automatically becomes part of the contract unless one of what three elements are present?

A

1) the offer limits acceptance to the terms of the offer 2) the offeror objects (to the additional term) within a reasonable time 3) the additional term materially alters the contract

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9
Q

What three elements make a term Material?

A

1) If the term results in a surprise or hardship 2) if it substantially affects the economic risks or benefits of the contract 3) if it, in any way, limits the usual remedies for breach

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10
Q

Is an Arbitration clause a material term?

A

No, arbitration clauses are not considered material because they are so common place in commercial contracts that their inclusion would not result in a surprise or hardship.

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11
Q

Is a waiver of warranty such as ‘As-is” a Material term?

A

Always

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12
Q

Under UCC 2-207 (2), if at least one party is a non-merchant, what happens to an acceptance with additional terms?

A

The additional terms will be ignored and not become part of the contract. They will result in a proposal only but that proposal will require express assent by the other party.

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13
Q

What is the difference between an Acceptance with Additional Terms and a Conditional Acceptance?

A

The use of express conditional language such as “if, unless, as long as” constitutes a conditional acceptance and, therefore, a rejection and counter-offer.

Acceptance with Additional terms does not include any express conditional language and, as between merchants, is considered a valid acceptance of the initial offer (and a binding contract).

As between merchants, the additional terms will become part of the contract unless one of the three exceptions apply, the 1) offer limits acceptance to the terms of the offer 2) offeror objects to the additional terms within a reasonable time, or 3) the additional terms materially alter the contract.

If at least one party is a non-merchant, the acceptance of the initial offer is valid, but the additional terms constitute only a proposal which will require express assent by both parties.

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14
Q

What happens to an Acceptance with Different Terms?

A

The Different (differing) terms are knocked out of both the offer and acceptance. A valid contract is formed and UCC Gap fillers will then be used to make the contract reasonable.

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15
Q

UCC 2-207 (3) addresses the Last Shot Rule under the UCC. Does the Last Shot Rule apply to the UCC?

A

No, it only applies to Common law contracts. There is no “implied acceptance by performance” under the UCC.

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16
Q

Under UCC 2-207 (3), when parties exchange rejections and counter-offers and then one party does not return a rejection and counter-offer but instead performs, since there is no Last Shot Rule under the UCC and no “implied acceptance by performance”, what happens?

A

Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract, even if the writings of the parties do not establish a contract. In this case, the terms of the contract will be those on which the past writings of the parties agree.

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17
Q

What is the primary benefit of a Requirement or Output contract?

A

It is an effective way to keep costs fixed.

18
Q

Other than the issue of definite and certain terms with regard to quantity, what is another important issue that Requirement and Output contracts raise?

A

Binding obligation on both parties

19
Q

How do Requirement and Output contracts overcome the illusory implication around a binding obligation on both parties?

A

By requiring both parties to perform in good faith.

20
Q

How might a party limit their obligations under a Requirement or Output contract?

A

By stating an estimated amount

21
Q

Is there a limitation on a Minimum to Require or Output?

A

No, requirement or output may drop to zero as long as it does so in good faith.

22
Q

Is there a limitation on the Maximum to Require or Output?

A

Yes, neither can be unreasonably disproportionate to the stated estimate. If no estimate was stated, then it can’t be unreasonably disproportionate to prior requirements.

23
Q

What would constitute an “unreasonably disproportionate” increase to Require or Output?

A

Any increase above 20-30%

24
Q

What is one very important element of Contract Construction?

A

Ordinary language

25
Q

What constitutes an ‘Agreement” under Contract Construction?

A

A bargain of the parties as found in their language or by other circumstances.

26
Q

Outside of language, what are the three other circumstances looked to when forming an “Agreement” under Contract Construction?

A

1) Course of Performance 2) Course of Dealing 3) Trade Custom and Usage

27
Q

What is Course of Performance in Contract Construction?

A

Repeated occasions of performance by either party with knowledge and without objection. Performance accepted or acquiesced to without objection is relevant to determine the meaning of a contract.

28
Q

What is Course of Dealing in Contract Construction?

A

Previous conduct between parties with regard to a particular transaction which can (fairly) establish a common basis of understanding.

29
Q

What is Trade Custom and Usage in Contract Construction?

A

Any regular practice in dealing within a vocation or trade that justifies an expectation that it will be observed with respect the transaction in question.

30
Q

When interpretations of Course of Performance, Course of Dealing, or Trade Custom and Usage are inconsistent with each other, what order is used to resolve conflicts within Contract Construction?

A

1) Express terms 2) Course of Performance 3) Course of Dealing 4) Trade Custom and Usage

31
Q

What is a Gap Filler?

A

If a contract has failed to address a nonessential item, and the parties are uncertain as to the performance expected, the court will fill those gaps.

32
Q

How will the Courts decide how to fill Gaps in Contract Construction?

A

Under Common Law, the court will assume reasonable terms. Under the UCC, there are 10 sections commonly used by the courts as Gap Fillers.

33
Q

Under the UCC, what is the content of the 10 UCC sections commonly used as Gap Fillers?

A

1) Price 2) Delivery in a single lot 3) Place for delivery 4) Time for delivery 5) Time for payment 6) Warranty of title 7) Implied warranty of merchantability 8) Implied warranty of fitness for a particular purpose 9) Time and place for title to pass 10) Payment by check or cash

34
Q

What is a Modification?

A

When a valid contract exists but, at some later time, the parties wish to change the terms of the contract.

35
Q

What is the most important thing that is required for a valid contract Modification?

A

Mutual assent to the terms by both parties

36
Q

How do the requirements for a valid Modification differ between the Common Law and UCC (assuming mutual assent by both parties)?

A

Common law requires additional consideration by both parties. The UCC does not require additional consideration.

37
Q

Under the UCC, since no consideration is required for a Modification, and other than express assent by both parties, what is required?

A

That the modification is requested in Good Faith

38
Q

Must a Modification still satisfy the Statue of Frauds?

A

Yes, unless a waiver and estoppel have occured

39
Q

If there is a provision that requires a Modification to be in writing and signed by both parties, that provision is enforceable unless?

A

A waiver and estoppel have occurred

40
Q

What UCC section governs Modifications for contracts to the sale of goods?

A

2-209