Determining the Terms of the Contract Flashcards
(6 cards)
Parole Evidence Rule
Excludes evidence of prior or contemporaneous agreements contradicting a final writing
* 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.
* Parol evidence is oral and physical
* Applies to evidence before the contract
* Parol evidence can be offered to show subsequent modifications of a written contract.
* If a party to a written agreement alleges facts (for example, mistake) entitling that party to reformation of the agreement, the parol evidence rule is inapplicable.
Exceptions to Parol Evidence Rule
Partially integrated writing:
* 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 proving consistent additional terms.
* The UCC presumes all writings are partial integrations.
Effect of Merger Clause:
* 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 contracts, however, the modern trend is to consider it as one factor in determining integration.
Both Parties Must be Aware of the Writing:
* To be an integration, both parties must have intended the writing to be the final expression of their agreement.
* If one party prepares a memo of an oral agreement and that writing is not shown to the other party, it cannot be an integration, and the parol evidence rule will not apply.
Correct Clerical Error
Defense Against Formation & Interpretation (Evidence Outside the scope of the Parol Evidence Rule)
a. Validity Issues
* A party to a written contract can attack the agreement’s validity. The party acknowledges (concedes) that the writing reflects the agreement but asserts, most frequently, that the agreement never came into being because of any of the following:
Formation Defects:
* Formation defects (for example, fraud, duress, mistake, and illegality) may be shown by extrinsic evidence.
Interpretation:
* If there is uncertainty or ambiguity in the written agreement’s terms or a dispute as to the meaning of those terms, parol evidence can be received to aid the fact finder in reaching a correct interpretation of the agreement.
* However, if the meaning of the agreement is plain, parol evidence is inadmissible.
Course of Performance (General Rules of Contract Construction)
Parties’ conduct under prior installments of current contract
Course of Dealing (General Rules of Contract Construction)
Parties’ conduct in prior contracts
Trade Usage (General Rules of Contract Construction)
Industry norms parties are aware of
