contracts/sales: if there is an enforceable deal, what are the terms Flashcards
Parol Evidence Rule (PER)
Complete Integration:
If a written contract is the final and complete agreement of the parties (i.e., it is a fully integrated contract), the parol evidence rule prohibits parties from introducing prior oral statements or writings or contemporaneous oral statements that add to or contradict the written contract.
If a contract contains a merger clause (“This is the complete and final agreement.”), there is a presumption of complete integration.
On the MBE, parol evidence questions will generally state (or assume) that the contract is completely “integrated.”
Partial Integration:
If a written contract is the final (but not complete) expression of the parties’ agreement, the parol evidence rule prohibits parties from introducing prior oral statements or writings or contemporaneous oral statements that contradict the written contract.
Whether a writing is integrated (completely or partially) is a question of law for the judge.
PER exceptions
situations in which parol evidence is admissible:
(1) parol evidence is admissible to prove that the contract never became operative because of fraud, duress, mistake, illegality, or failure to satisfy a condition precedent.
(2) parol evidence is admissible to establish the meaning of an ambiguous term, to show that consideration was (or was not) in fact paid, to show the nature or source of consideration, to establish a case for reformation (i.e., the writing contains a clerical error), or to prove unconscionability.
(3) oral or written statements made after the contract was executed—usually as part of a contract modification—are not subject to the PER; thus, such statements are generally admissible (subject, of course, to SOF).
(4) under the UCC, the following evidence (in order of preference) is admissible to explain or supplement a contract, regardless of whether the contract is integrated or ambiguous:
1) course of performance (the same parties in the same contract);
2) course of dealing (the same parties in earlier contracts); and
3) usage of trade (other parties in the same industry).
(5) if a prior or contemporaneous additional agreement is of a type that would “naturally and normally” be contained in a separate agreement (with separate consideration), its admissibility is not barred by the PER (e.g., a side deal).
Implied terms: general rule
At common law, if the parties failed to agree on a material term, a court would not enforce the agreement because of indefiniteness.
Under modern law, if a contract has been formed that fails to address one or more terms, the court will fill-in those terms as follows:
common law, UCC and its gap fillers
Implied terms: common law and UCC
All contracts contain implied promises of good faith, fair dealing, and reasonable efforts in connection with performance and enforcement.
Implied terms: UCC gap-fillers: time & place of payment
Under the UCC, payment is due at the time and place at which the buyer is to receive the goods.
In an installment contract, payment is due at the time and place at which the buyer is to receive each installment.
The buyer may pay by check, but the seller may demand cash; in such event, the buyer must be given a reasonable time to obtain the cash.
Implied terms: UCC gap-fillers: Place of Delivery and Risk of Loss
1) Non-Delivery Contracts.
Place of Delivery. If the contract does not call for (expressly or implicitly) delivery, the UCC presumes that the buyer will pick up such goods at the seller’s place of business or, if none, the seller’s residence.
Risk of Loss. In such cases, risk of loss shifts to the buyer upon:
- physical receipt by the buyer if the seller is a merchant or
- tender by the seller if the seller is a non-merchant
2) Delivery Contracts.
The UCC recognizes two types of “delivery” contracts, which are used when the parties expressly provide for delivery by common carrier or the circumstances are such that common carrier delivery is implied:
(1) Shipment Contracts: Such contracts are created by the phrase “FOB or FAS Seller’s location.” Under such contracts, the seller’s risk of loss ends when the seller places the goods with a common carrier.
Presumption: If a contract calls for delivery but is silent as to risk of loss, the UCC presumes that the contract is a “shipment” contract.
Seller’s Breach: Risk of loss remains with the seller if the seller is in breach (e.g., shipped nonconforming goods).
(2) Destination Contracts: Such contracts are created by the phrase “FOB or FAS Buyer’s location.” Under such contracts, the seller’s risk of loss ends when the goods arrive at buyer’s location.
Buyer’s Breach: Risk of loss is borne by the buyer if the buyer is in breach (e.g., anticipatory repudiation), but the buyer is entitled to any insurance proceeds the seller obtains for such loss.
Implied terms: UCC gap-fillers: Price
Price:
The parties can conclude a contract for sale even though the price is not settled. In such case, the price is a reasonable price at the time for delivery if:
(a) nothing is said as to price;
(b) the price is left to be agreed by the parties and they fail to agree; or
(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded by a third person or agency (e.g., Kelley Blue Book) and it is not so set or recorded.
Implied terms: UCC gap-fillers: date & mode of delivery
Date of Delivery:
The time for shipment or delivery or any other action under a contract if not agreed upon by the parties shall be a reasonable time. Reasonableness depends on the circumstances, such as:
how complicated the good is to make
past dealings of the parties
the practice of the industry
the needs of the buyer
A party must give notice before treating a sales contract as breached due to the passage of a reasonable time for performance.
Mode of Delivery:
The default rule is that goods will be delivered and received in a single lot.
warranties: Express
statements of fact (but not puffing), models, samples, etc. that are part of the buyer’s basis of the bargain;
strict liability for breach, and express warranties may not be disclaimed
The Parol Evidence Rule may bar evidence of express warranties made prior to the execution of an integrated contract.
warranties: implied
Implied Warranty of Merchantability
(this warranty applies only to Merchants who sell goods of this kind): the goods must be fit for their ordinary purposes. This warranty may be disclaimed generally (e.g., by selling “as is” or “with all faults”) or specifically (e.g., by a CONSPICUOUS disclaimer mentioning “merchantability”).
Implied Warranty of Fitness for a Particular Purpose:
this warranty is made by any seller who knows the buyer’s specific needs and knows that the buyer is relying on the seller’s expertise to select suitable goods. This warranty may be disclaimed generally (e.g., by selling “as is” or “with all faults”) or specifically (e.g., by a CONSPICUOUS written disclaimer).
Other Implied Warranties. The seller also impliedly warrants that she
(1) has good title;
(2) has the right to convey; and
(3) there are no liens or encumbrances on the goods.
