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Flashcards in Interpretation Deck (13):
1

What's the difference between a written agreement that's “fully integrated" and one that's “partially integrated"?

A “fully integrated” agreement is one that the parties intend to be a complete and final statement of their agreement. In other words, there aren't any other terms they consider part of the agreement. For a “partially integrated” agreement, the parties view the terms in the written agreement as final, but they don't view them as the only terms. For instance, say that Bluto agrees to loan Wimpy $500 to buy hamburgers, with a due date of Tuesday on the loan, at 15% interest. They reduce the agreement to a writing, which mentions their names, the amount and term of the loan, but not the interest rate. They couldn't have intended the written agreement to reflect their complete agreement, because they agreed on interest, and it's not in writing. Thus, the agreement can be only partially integrated (assuming they intended it to be final as to the terms it does state).

SIGNIFICANCE: At least in theory, the parol evidence rule stops the parties from introducing evidence of terms to supplement a fully integrated agreement; but they may introduce evidence of consistent additional terms for a partially integrated agreement. This distinction is not really very important in real life, because courts usually tend to allow the parties to supplement written agreements without regard to whether they're technically “integrated” or not (in fact, you could argue that the existence of additional terms that don't contradict the contract suggest that the contract wasn't fully integrated in the first place).

2

How does the UCC handle the Parol Evidence Rule?

Under UCC §2-202, in relation to sales contracts only, no evidence is admissible to show prior written or oral agreements, or contemporaneous oral agreements contradicting the contract. However, a contract may be explained or supplemented by evidence of trade usage or course of dealings or performance. Furthermore, unless the contract is found to be a complete and exclusive statement of terms, evidence of consistent additional terms may be admitted.

3

What are the exceptions to the Parol Evidence Rule where other evidence relating to the contract is admissible?

Even if a contract would otherwise be totally integrated, evidence is admissible to prove:

DEFECTS IN FORMATION (e.g., fraud, duress, lack of consideration, mistake)— meaning that the contract doesn't reflect the actual agreement or one party took advantage of the other party's unilateral mistake;

That the agreement WASN'T FINAL (e.g., that it was a memo reflecting a preliminary negotiation position);

NONOCCURENCE OF CONDITION PRECEDENT;

How AMBIGUITIES should be interpreted—but the evidence can't contradict terms (i.e., party can't say he didn't mean what the contract says)(typically, this kind of evidence includes custom or usage); and

OMITTED TERMS.

4

OK, you've got a written agreement and you've got six other types of agreements related to it—you've got prior written and oral agreements, contemporaneous written and oral agreements, and subsequent written and oral agreements. Of those six, which ones are covered by the Parol Evidence Rule, such that they can't be admitted to contradict or vary the terms of your written agreement?

Only prior written and oral agreements and contemporaneous oral agreements. That means that if a contract is fully integrated—that is, the parties intend it as the full and final statement of their agreement—you can't contradict or vary that agreement with earlier agreements or contemporaneous oral agreements.

That means that the parol evidence rule doesn't apply to contemporaneous written agreements (according the majority rule, those are part of the agreement itself). And it doesn't cover subsequent terms, because those are modifications, and they're covered separately.

5

The Parol Evidence Rule generally prevents parties from proving terms that contradict or vary a “fully integrated" written agreement. How do you determine if a written agreement is “fully integrated"?

An agreement is fully integrated if the parties intended it as the full and final statement of their agreement. According to the modern rule, you can look to any relevant evidence to determine whether that was the parties' intention; for instance, you can look to the circumstances of the contract's creation as well as the prior and subsequent statements of the parties, as well as the contract itself (e.g., a contract that is complete and formal is likely to be considered fully integrated).

TRADITIONAL RULE: It used to be that the court could look only to the face of the contract, or as it's sometimes called, the “four corners” of the contract, to see if it appears integrated. CP §3.4 at 131-132.

6

Marshall and Blackstone have a written contract for the sale of “Scales of Justice" candy dishes. When Marshall subsequently sues Blackstone for breach, does the Parol Evidence Rule forbid Marshall from introducing evidence that the written contract was not intended to be a complete expression of the agreement?

No. The Parol Evidence Rule forbids only the introduction of prior agreements or contemporaneous oral agreements that vary, modify, or contradict a “fully integrated” contract intended to be the final and complete expression of agreement. Thus, evidence that the writing was not fully integrated is always admissible.

7

Washington and Adams enter into a contract for the sale of Declaration of Independence placemats. They have a written contract intended to be a final, complete expression of their agreement. If a lawsuit concerning the contract later arises, will Washington be barred from introducing evidence of subsequent oral modifications by the Parol Evidence Rule?

No. The Parol Evidence Rule doesn't deal with subsequent modifications to contracts. It covers only prior OR contemporaneous oral agreements modifying, varying, or contradicting the written agreement.

CP §3.2 at 125-126.

8

Syron agrees in a valid written contract to pick up a horse for Hector at the outskirts of Troy. Syron picks up the wrong horse; the horse he picks up is, in fact, filled with Greek soldiers. In the ensuing lawsuit for breach of contract, may parol evidence be introduced to determine which horse Hector meant?


Yes. The Parol Evidence Rule bars only the introduction of evidence that contradicts, varies, or modifies the written contract. Here, the evidence will disclose an ambiguity and clarify it; thus, it is admissible.

RELATED ISSUE: Had either party known of the ambiguity (or should have known of it), the ambiguity would be resolved in the other, innocent party's favor.

CP §3.10 at 150-151

9

Bandit holds Victoria's daughter, Mary, hostage, until Victoria agrees to sell Bandit the Hope Diamond for $20,000, far below its true value. Victoria agrees in writing; however, she reneges as soon as Mary is released. When Bandit sues her for breach, will the Parol Evidence Rule bar evidence of duress?

No. The Parol Evidence Rule bars only extrinsic evidence of prior agreements or contemporaneous oral agreements that contradict, vary, or modify the contract; evidence of defects in formation are admissible. Thus, lack of consideration, fraud and duress, as here, may be proven via extrinsic evidence.

CP §3.7 at 145.

10

The parol evidence rule is

I a rule of evidence.

II a substantive rule of contract law.

II clear and well understood throughout the states and enjoys consistent and coherent interpretation and understanding.

a. II only
b. I and II only
c. II and III only
d. I, II, and III

(1) All authorities agree that it is a mass of confusion and inconsistency. That eliminates option III, which eliminates choices C and D. Option II makes a true statement, meaning that the answer is A or B, depending on whether option I is true or false. Despite its name, the parol evidence rule is not a rule of evidence but a rule of contract law. I and III are false, II is true, so A is right.

11

The parol evidence rule

I concerns the definition of signatures as to those contracts that are unenforceable unless set forth in writing.

II concerns the enforceability of terms upon which two parties orally agree but then fail to include in a writing that purports to represent their contract.

III is a substantive rule of evidence that concerns the relative probative values of signed and unsigned writings.

a. II only
b. I and II only
c. III only
d. II and III only

About the parol evidence rule you now know this much:

All authorities agree that it is a mass of confusion and inconsistency.

Despite its name it is not a rule of evidence, but a substantive rule of contract law. That eliminates option III. Further, the rule is in no way concerned with the difference in probative value between signed and unsigned writings, so option III is false for that reason too.

It concerns, generally, this question: When two parties form an oral contract and then purport to reduce it to writing, is their contract then limited to the terms of the writing or does it include, also, terms on which they orally agreed but failed to set forth in writing? That squares very nicely with option II. That means the answer is either A or B, depending on whether option I is true or false.

And Option I Is — False. Don’t confuse the parol evidence rule with the Statute of Frauds. They’re unrelated. The Statute of Frauds (Chapter 15) identifies those contracts that are unenforceable unless recorded in a writing “signed by the party to be charged.” Because that doctrine turns, in part, on the word “signed,” it concerns also the definition (for its own purposes) of “sign”/ “signature.” The parol evidence rule, although it does relate to writings, does not provide that any particular kind of contract must be in writing or that, if it is, it must be signed. Options I and III make false statements. Option II makes a true one, so A is right.

12

Shayna and Chris agree orally that Chris will act as supervisor and manager of Shayna’s commercial ice skating rink, Monday through Friday from 9 A.M. to 5 P.M. Shayna is to pay Chris an annual salary of $150,000, in twelve monthly installments of $12,500 each, on the first day of each month. While negotiating, the parties exchange a number of notes and conduct a number of conversations. Ultimately, they agree, orally and by handshake, to the terms described above, and to an additional fifty terms as well. Thereafter, in cursive, they sign their first names only to this short writing, labeled “Employment Contract”:

The undersigned Shayna Signorelli (“Employer”) and Chris Matus (“Employee”) hereby agree, finally and unconditionally, that Employee will serve as Employer’s general manager, on an ordinary full-time basis and that he will be paid for his service an amount satisfactory to him. Employee acknowledges that the skating rink operates from 8 A.M. to 10 P.M. seven days per week.

If a judge concludes that the writing is a partial integration and not a total integration, her reason will most likely be that

a. the writing names itself an “Employment Contract” and therefore must represent, in part, terms on which the parties have finally reached agreement.
b. the writing is dated and signed by both parties, each setting forth his or her cursive signature.
c. the writing specifies the number of days per week and hours during which the skating rink operates.
d. in her opinion, the parties intended the writing as a final statement as to some of what each would do for the other, but they did not intend it fully to state all on which they had agreed.

The question tests only the superficial definition of “partial integration” as we describe it above. A partial integration (whatever its significance, to be discussed in section G below) refers to two parties who first form an oral contract and then reduce it to a writing, which, in a judge’s opinion, they “intended” as a final expression of those terms that do appear in the writing, but not as a complete expression of all terms on which they agreed. D very plainly and simply restates that definition, and that’s why D is right.

13

Shayna and Chris agree orally that Chris will act as supervisor and manager of Shayna’s commercial ice skating rink, Monday through Friday from 9 A.M. to 5 P.M. Shayna is to pay Chris an annual salary of $150,000, in twelve monthly installments of $12,500 each, on the first day of each month. While negotiating, the parties exchange a number of notes and conduct a number of conversations. Ultimately, they agree, orally and by handshake, to the terms described above, and to an additional fifty terms as well. Thereafter, in cursive, they sign their first names only to this short writing, labeled “Employment Contract”:

The undersigned Shayna Signorelli (“Employer”) and Chris Matus (“Employee”) hereby agree, finally and unconditionally, that Employee will serve as Employer’s general manager, on an ordinary full-time basis and that he will be paid for his service an amount satisfactory to him. Employee acknowledges that the skating rink operates from 8 A.M. to 10 P.M. seven days per week.

If the judge were to conclude that the writing constitutes no integration at all, she would most likely do so because

a. in her opinion, it fails to state some of the terms on which the parties actually agreed.
b. in her opinion, the parties did not “intend” the writing to be final even as to the terms it states.
c. each of the parties signed with a first name, but not a last name.
d. it does not refer to itself as an integration of the parties’ agreement.

This question requires that you know the definition of “integration.” An integration is a document that, as to the terms it does set forth, the parties “intend” to be a final expression of their agreement. If in a judge’s opinion the parties did not intend the writing to be final as to anything, then the writing is no integration at all. B restates that simple rule, and that’s why B is right.

The “guts” of the parol evidence rule, and the confusion in which it bathes, lie in the meaning (or meaninglessness) of “partial” and “total” “integration.” We address that subject in sections E and F below. But, now, with what little we’ve told you about that topic, let’s, at least (and at last), state the parol evidence rule. Until we get to section H, we’re going to omit two of the rule’s words, and mark them with two blank lines.