Liquidated Damages, Specific Performance and Contract Meaning (parol evidence) Flashcards

Question

What is integration in the context of contracts?

Answer 1

Integration refers to whether the primary contract includes all parts of the agreement or just some parts. ## Footnote A fully integrated contract includes all important terms, while a partially integrated contract may allow for external evidence.

Answer 2

A clause stating that the contract includes all agreements of the parties, indicating full integration. ## Footnote This clause signifies that no other agreements exist outside the written contract.

Answer 3

Fully integrated and partially integrated. ## Footnote A fully integrated contract bars external evidence, while a partially integrated contract may allow it.

Answer 4

The analysis of the parol evidence rule continues. ## Footnote This means that external evidence may still be considered.

Answer 5

It may be unclear whether the contract is fully integrated or partially integrated. ## Footnote This requires further examination of the contract's terms.

Answer 6

To determine the admissibility of evidence regarding agreements made before or concurrently with the primary contract. ## Footnote This rule seeks to clarify the intent of the parties in the contract.

Answer 7

A rule about whether parties can bring in evidence of a secondary external agreement to prove something about a primary written agreement. ## Footnote It governs the admissibility of external evidence in contract law.

Answer 8

Whether the contract is integrated and how integrated it is. ## Footnote Integration refers to whether the written contract captures all agreed terms.

Answer 9

External evidence must not contradict the primary written contract. ## Footnote If there is a contradiction, the evidence is not admissible.

Answer 10

The evidence is not admissible. ## Footnote Courts prioritize the primary written agreement over external evidence.

Answer 11

A primary contract states a price of $200,000, while parol evidence claims a different price of $500,000. ## Footnote This inconsistency leads to the rejection of the secondary evidence.

Answer 12

When the primary document leaves room for further details and those details do not contradict the primary agreement. ## Footnote This allows for clarification without conflicting with the written terms.

Answer 13

A fully integrated contract captures all agreed terms, while a partially integrated contract does not. ## Footnote A merger clause often indicates full integration.

Answer 14

The courts will scrutinize the admissibility of the secondary agreement more closely. ## Footnote They may be skeptical since the earlier agreement could have been included in the final contract.

Answer 15

If both agreements are written and occur at the same time, the secondary agreement is admissible. ## Footnote The courts do not expect parties to rewrite their initial contracts for concurrent agreements.

Answer 16

Further analysis is needed to determine admissibility under the parol evidence rule. ## Footnote Oral agreements can complicate the analysis.

Answer 17

If it has its own consideration and stands independently from the primary agreement. ## Footnote This means it was negotiated separately with its own terms.

Answer 18

The parol evidence rule blocks the admission of any secondary agreements. ## Footnote A merger clause signifies that the written contract contains all terms agreed upon.

Answer 19

Does the primary contract fully capture all terms agreed upon by the parties? ## Footnote This assessment determines whether parol evidence can be considered.

Answer 20

False. ## Footnote Parol evidence is only admissible if it does not contradict the primary contract.

Answer 21

not admissible.

Answer 22

A set of specialized rules ## Footnote Courts vary greatly in how they frame their tests for validity.

Answer 23

Yes, they are generally enforceable.

Answer 24

If it is found to be a 'penalty.'

Answer 25

A label attached by a court when it concludes that a clause is unenforceable.

Answer 26

No, it does not provide a rule.

Answer 27

Were the damages difficult to ascertain when the contract was made? ## Footnote This assesses the complexity of estimating damages at the time of contract formation.

Answer 28

Is the amount stated as liquidated damages reasonable in light of the actual and/or anticipated damages? ## Footnote This evaluates the reasonableness of the liquidated damages amount compared to the expected damages.

Answer 29

They tend to have an inverse relationship. ## Footnote The more difficult damages are to ascertain, the more leeway courts give parties in estimating damages.

Answer 30

False ## Footnote Courts are split in their articulations of the rule.

Answer 31

Actual and/or anticipated damages. ## Footnote This consideration helps determine if the liquidated amount is justified.

Answer 32

Here's a **FIRAC** (Facts, Issue, Rule, Application, Conclusion) analysis for **Leeber v. Deltona Corp., 546 A.2d 452 (1988)**: --- **F - Facts** - Plaintiffs (Leeber, Morton, and Drewry), residents of Maine, agreed to purchase a condominium in Florida from Deltona Corp. (via its subsidiary Marco Surfside, Inc.) for $150,200. - They paid a 15% deposit ($22,530) under a Subscription and Purchase Agreement, which stated the deposit would be retained by Deltona as **liquidated damages** in case of buyer default. - Plaintiffs failed to close by the final set deadline (July 20, 1982), and Deltona cancelled the agreement on July 27, 1982, retaining the deposit. - Deltona resold the condo for $167,500 days later. - Plaintiffs sued, arguing that the liquidated damages clause was **unconscionable** and thus unenforceable. The Superior Court agreed and awarded plaintiffs a refund of the deposit minus Deltona’s proven costs. - Deltona appealed. --- **I - Issue** Was Deltona’s retention of the $22,530 deposit under the liquidated damages clause **unconscionable** and thus unenforceable under Florida law? --- **R - Rule** Under Florida law: - A liquidated damages clause is enforceable if damages are not reasonably ascertainable at the time of contract formation. - Even if valid on its face, a court can relieve against forfeiture if retention of the deposit is **unconscionable**, meaning it “**shocks the conscience**.” - Courts consider four possible exceptions that may render retention unconscionable: 1. Fraud by the seller 2. Misfortune beyond buyer’s control 3. Mutual rescission 4. Seller’s benefit so excessive it shocks the conscience --- **A - Application** - The damages were not ascertainable at the time of contract formation, so the clause was **not a penalty**. - The 15% deposit was **standard and reasonable** under Florida law. - There was **no evidence of fraud**, **misfortune**, or **mutual rescission**. - The court found that Deltona resold the condo at a profit and only incurred minimal losses. - However, the trial court erred by treating the case as if damages needed to be recalculated post-breach—**effectively ignoring the purpose of a liquidated damages clause**. - The Supreme Judicial Court found that the resale and reduced losses **did not make the retention of the deposit unconscionable** or “shock the conscience.” --- **C - Conclusion** The Supreme Judicial Court of Maine held that the trial court erred in finding the liquidated damages clause unconscionable. The appellate court **vacated** the judgment on Count I and ordered **judgment in favor of Deltona and Marco Surfside**. Counts II and III, already dismissed at trial, were affirmed.

Answer 33

Facts Dr. Hayes received a National Health Service Corps (NHSC) scholarship for two years of medical school, totaling $29,545. In return, she agreed to perform two years of service in an underserved area after completing her medical education. Hayes was granted a deferment to complete a three-year internal medicine residency, but during her second year, she switched to dermatology, a specialty not approved by NHSC. Her request to serve in NHSC as a dermatologist was denied, and she failed to participate in placement or fulfill her service obligation. The government sued to recover treble damages as specified in the NHSC scholarship contract under 42 U.S.C. §254o. Hayes admitted breach but challenged the treble damages, arguing they were punitive and therefore an unenforceable penalty. Issue Is the treble damages provision in the NHSC scholarship contract an unenforceable penalty, or is it a valid and enforceable liquidated damages clause? Rule Liquidated damages are enforceable if they are a fair and reasonable estimate of anticipated harm at the time of contract formation, especially where actual damages are uncertain or difficult to measure. The treble damages provision under 42 U.S.C. §254o(b)(1) is written into the statute and contract: the government may recover three times the scholarship amount upon breach. Application The court noted that determining the actual damages from the breach (e.g., the specific value of a doctor's service in an underserved area) is inherently speculative. The treble damages were found to be a reasonable legislative and contractual mechanism to enforce performance and ensure the public policy goals of NHSC. Courts have upheld similar damages in other government programs like military medical scholarships. Hayes entered into the agreement knowingly and voluntarily, and was aware of the treble damages clause. The court rejected Hayes' argument that the damages were unconscionable or punitive. Conclusion The treble damages provision is a valid, enforceable liquidated damages clause, not a penalty. There was no genuine issue of material fact, and the court granted summary judgment in favor of the United States.

Answer 34

Any order by a court requiring a party to act or to refrain from acting.

Answer 35

A court order requiring a party to a contract to perform the contract.

Answer 36

A court order prohibiting a party from doing a particular act or activity.

Answer 37

Specific performance.

Answer 38

In courts of equity.

Answer 39

Ecclesiastics (not lawyers).

Answer 40

One judge can provide either legal or equitable relief.

Answer 41

When damages would be inadequate to fully address the non-breaching parties' injuries.

Answer 42

If the contract is deemed substantively unfair or if granting relief requires excessive court supervision.

Answer 43

* The fundamental requirement for obtaining specific performance of a contract * The discretionary considerations courts weigh in deciding whether to grant specific performance * The requirements for obtaining an injunction to enforce a covenant not to compete.

Answer 44

That it is 'inadequate'.

Answer 45

* Difficulty or impossibility of calculating damages * Irreplaceability of the subject of the contract * Insolvency of the defendant.

Answer 46

A contract regarding a family heirloom.

Answer 47

Every piece of land is unique and non-fungible.

Answer 48

It is inadequate if the goods are unique or in other proper circumstances.

Answer 49

An 'inability to cover'.

Answer 50

That the facts of her particular case meet the inadequacy requirement.

Answer 51

Facts In 1947, Campbell Soup Co. contracted with the Wentz brothers, Pennsylvania farmers, to purchase all Chantenay red cored carrots grown on 15 acres of their land at prices ranging from $23–$30 per ton. By early 1948, the market price had risen to $90/ton, and the Wentzes refused to deliver the carrots at the contract price. They sold ~62 tons to a third party, Lojeski, who resold about 58 tons—some even back to Campbell. Campbell filed for specific performance and to enjoin further sales of the contracted carrots to others. The trial court denied equitable relief. Issue Was Campbell Soup Co. entitled to specific performance of the carrot supply contract, or was the contract too unconscionable to be enforced by a court of equity? Rule Specific performance may be granted for sale of goods where legal remedies are inadequate. A contract may be unenforceable in equity if it is found to be unconscionable, even if not illegal. Application The Chantenay carrots were unique in appearance, processing ease, and uniformity, making monetary damages inadequate—thus, normally warranting specific performance. However, the contract terms were one-sided and overreaching: Campbell could reject overages, reject produce based on its own determination, and was not held liable for damages in breach. The grower couldn't sell rejected carrots elsewhere without Campbell's permission, nor store them offsite. The grower was heavily restricted while Campbell retained broad discretion with minimal consequence. The court described this as a “hard bargain”, written entirely in Campbell’s favor. Even though the grower breached willfully, equity will not enforce a contract that offends the conscience of the court. Conclusion Although the product was unique enough to justify specific performance, the contract was too unconscionable for equitable enforcement. Therefore, the trial court's denial of relief was affirmed.

Answer 52

A rule governing what types of evidence a jury may hear regarding contract terms ## Footnote It defines the limits of the contract to be construed.

Answer 53

* What terms are part of the contract? * What does the contract mean? * Did the parties properly perform? * What are the consequences of a breach?

Answer 54

The process of identifying and understanding all express and implied terms of a contract ## Footnote It involves determining which terms are part of the contract.

Answer 55

Determining the proper order of performance of contract obligations and evaluating performances ## Footnote It also includes assessing excuses for non-performance.

Answer 56

An alleged contract term not reflected in the parties' writing ## Footnote It can be oral testimony or written evidence about unwritten terms.

Answer 57

False ## Footnote The rule prevents a jury from hearing about terms not contained in the written contract.

Answer 58

The jury is prevented from hearing about that particular term ## Footnote The rule acts as a barrier to the admission of certain evidence.

Answer 59

[performances]

Answer 60

A significant failure to perform contractual obligations that affects the contract's purpose ## Footnote It has legal consequences that differ from a minor breach.

Answer 61

It implies an obligation of honesty and fairness in performance, even if not explicitly stated ## Footnote Courts often imply this duty into contracts.

Answer 62

* Good faith * Reasonable efforts * Other terms not explicitly stated

Answer 63

It does not significantly affect the contract's purpose and may not have severe legal consequences ## Footnote Minor breaches may allow for some remedies but not full termination.

Answer 64

The words of the contract and the intent of the parties ## Footnote This analysis helps clarify obligations.

Answer 65

False ## Footnote Sometimes, additional terms may be implied or evidenced by extrinsic evidence.

Answer 66

Whether the parties fully performed their obligations as promised

Answer 67

To evaluate the weight and credibility of evidence presented regarding contract terms ## Footnote The jury decides if the parties truly agreed to the contested terms.

Answer 68

The belief that parties have incorporated all terms of their agreement in a written document.

Answer 69

To exclude evidence of agreements extrinsic to the written document.

Answer 70

Determining whether the parties intended the written document to be the final and complete expression of their agreement.

Answer 71

* Completely integrated * Partially integrated * Not integrated at all

Answer 72

Extrinsic evidence is barred.

Answer 73

Extrinsic evidence is admissible only if it is consistent with the terms in the writing.

Answer 74

Extrinsic evidence comes in automatically.

Answer 75

* Exclude all extrinsic evidence if the writing is completely integrated * Exclude inconsistent evidence if the writing is partially integrated

Answer 76

Yes, such as evidence of fraud, mistake, undue influence, or duress.

Answer 77

Whether parol evidence of contract terms not contained in the writing is admissible.

Answer 78

Apply the threshold rules to determine if the parol evidence rule applies at all.

Answer 79

Determine whether the parties' agreement is integrated at all.

Answer 80

Determine the degree of integration: completely or partially integrated.

Answer 81

Whether the parol term is consistent with or contradicts the writing.

Answer 82

Diagram 10-2, the Contract Law Graphic Organizer.

Answer 83

It is subject to the main parol evidence rules but is admissible.

Answer 84

Evidence that is barred by the parol evidence rule.

Answer 85

Evidence that is admissible under the threshold rules and bypasses the parol evidence rule.

Answer 86

It is crucial for determining the admissibility of parol evidence.

Answer 87

Here’s a concise **flashcard-style revision summary** for **Step 1: Types of Evidence to Which the Parol Evidence Rule Applies**: --- **📝 Parol Evidence Rule – Step 1: Gatekeeping Rules** **Ask these 3 questions:** 1. Is the extrinsic evidence **oral or written**? 2. Is it from a **prior**, **contemporaneous**, or **subsequent** agreement? 3. Is there **separate consideration** for the extrinsic term? --- **✅ Parol Evidence Rule *Applies* (Full analysis required):** - **Prior oral/written terms** with *no extra consideration* - **Contemporaneous oral terms** with *no extra consideration* --- **❌ Parol Evidence Rule *Does NOT Apply* (Evidence is admissible):** - **Subsequent oral/written terms** - Terms with **separate consideration** - **Contemporaneous written terms** --- Keep this flashcard in mind before moving to Steps 2–4 of the parol evidence rule analysis. Want a flashcard for Step 2 next?

Answer 88

Step 2: Is the Contract Integrated at All? Not integrated if: Agreement is oral, or Writing has no final terms (e.g., draft, unsent/unsigned confirmation letter) 🔹 Step 3: Complete or Partial Integration? Two main approaches: 1️⃣ Williston (“Four Corners”) Approach: Merger/Integration clause? ➡️ Complete integration No clause? ➡️ Ask: Does it appear complete on its face? If yes: Complete integration, unless term was one parties *“naturally would have omitted” 2️⃣ Corbin (“All Evidence”) Approach: No presumption based on the writing alone Admit all evidence to assess parties' actual intent to fully integrate 🧠 Key Q: Does the court use Williston or Corbin? 🔹 Step 4: Is the Extrinsic Evidence Consistent with the Writing? Two views: Broad test (majority): Evidence must be “in harmony” with written terms Narrow test (minority): Evidence allowed unless it “completely negates” a written term

Answer 89

Facts Defendants (Laths) owned a farm and also had an icehouse on neighboring land. Plaintiff (Mitchill) agreed to purchase the farm for $8,400 after defendants orally promised to remove the icehouse, which she found objectionable. The written contract for sale did not mention the icehouse removal. After the sale, the defendants refused to remove the icehouse. Mitchill sued to enforce the oral promise. The issue centers around whether this oral promise is enforceable under the parol evidence rule. Issue Can an oral agreement to remove an icehouse—made contemporaneously with a written contract for the sale of land but not included in the written agreement—be enforced in light of the parol evidence rule? Rule Under New York law, a contemporaneous oral agreement may only be admitted alongside a written contract if: It is collateral in form; It does not contradict the written agreement; It is the sort of agreement that would not ordinarily be expected to be included in the written contract. Courts following the Williston approach (like New York) generally interpret integration narrowly and presume that a detailed, formal contract represents the complete agreement. Application Collateral in Form? Yes. The oral promise involved different land (icehouse on adjacent property) and was separate from the purchase of the farm. Contradiction? Maybe. It doesn’t directly contradict terms in the written contract but arguably adds to the obligations of the seller, which could be seen as inconsistent. Ordinarily Included? Court held yes—such an agreement would ordinarily be expected to be included in the written contract because it directly related to the inducement for the purchase. Judge Andrews (majority) concluded that since the written contract appeared complete and covered the sale comprehensively, any such side agreement should have been included if it was genuinely part of the bargain. Judge Lehman (dissent) argued that the oral promise was collateral and affected a separate parcel of land, and thus, the written contract for the farm need not include it. Conclusion The Court of Appeals of New York refused to enforce the oral agreement. The court reversed the lower court’s ruling and dismissed the complaint, holding that the oral agreement was too closely connected to the written contract to be treated as a separate, collateral agreement under the parol evidence rule.

Answer 90

Facts: Dallas Masterson and his wife, Rebecca, owned a ranch as tenants in common and conveyed the property to Medora and Lu Sine by grant deed in 1958. The deed reserved an option for the grantors (Masterson and his wife) to repurchase the property on or before February 25, 1968, for the same consideration previously paid, plus depreciation for improvements made by the grantees. Masterson was later adjudged bankrupt, and his trustee in bankruptcy sought to enforce the option. The trial court admitted extrinsic evidence to explain certain ambiguous terms in the deed but excluded evidence that the option was personal to the grantors and non-assignable. The trial court ruled in favor of the plaintiffs (the Mastersons) and declared their right to exercise the option. The defendants (the Sines) appealed, arguing that the option was too uncertain to be enforced and that the trial court improperly admitted extrinsic evidence. Issue: Whether the trial court properly admitted extrinsic evidence to explain the terms of the option agreement, including the consideration and depreciation value. Whether the trial court erred in excluding extrinsic evidence that the option was personal to the grantors and thus non-assignable. Rule: Parol evidence (extrinsic evidence) can be admitted to clarify ambiguous terms in a written contract, provided it does not contradict the written agreement. Parol evidence may not be used to contradict clear and unambiguous terms of a written agreement, especially when it concerns a collateral agreement such as an option’s assignability. Analysis: The trial court properly admitted extrinsic evidence to clarify the meaning of the phrase "same consideration as being paid heretofore" and to define the "depreciation value" of improvements. These terms were ambiguous, and the extrinsic evidence helped provide a clear understanding of their intended meaning. The trial court erred by excluding extrinsic evidence that the option was personal to the grantors and non-assignable. The deed itself did not explicitly mention whether the option was personal, and the family context of the transaction suggested that the option might have been intended as non-assignable to keep the property within the Masterson family. The majority concluded that such an agreement could have been made separately and would naturally be expected in a family transaction. Conclusion: The Supreme Court of California ruled that the trial court was correct in admitting extrinsic evidence to clarify certain terms of the deed but erred in excluding evidence regarding the personal nature of the option. The case was reversed, and the trial court's judgment was not upheld. The dissenting judge believed the trial court correctly adhered to the parol evidence rule and would have affirmed the judgment.

Answer 91

Here’s a FIRAC analysis of **Lee v. Joseph E. Seagram & Sons, Inc., 552 F.2d 447 (2d Cir. 1977)**: --- **FIRAC Format** --- **Facts** Harold Lee and his sons (the Lees) owned 50% of Capitol City Liquor Co., a wholesale liquor distributor in Washington, D.C., with the other half owned by relatives. In 1970, they negotiated with Seagram, a major supplier and former employer of Harold Lee, to sell Capitol City's assets. As a condition of the sale, Harold Lee orally secured a promise from Jack Yogman, an executive at Seagram and longtime friend, that Seagram would relocate his sons to a new distributorship of their own in a different city. This agreement was not written into the formal sales contract, which was executed with Seagram on September 30, 1970. Fifteen months later, after Seagram failed to relocate the sons, the Lees sued for breach of the oral contract. The jury found in favor of the Lees, and Seagram appealed, arguing that the oral agreement was inadmissible under the **parol evidence rule** and too **vague to enforce**. --- **Issue** Is an oral agreement made prior to or contemporaneously with a written contract enforceable when it was not included in the written contract, or is it barred by the parol evidence rule? --- **Rule** Under the **parol evidence rule**, prior or contemporaneous oral agreements are generally inadmissible to vary or contradict a fully integrated written agreement. However, a separate and collateral oral agreement may be admissible if: 1. It is independent and not inconsistent with the written agreement, 2. It is not something that the parties would ordinarily be expected to include in the written contract, and 3. The written contract is not a complete integration of all the mutual promises. --- **Application** The court found that: - The written sales agreement was ambiguous and lacked an integration clause, leaving open the possibility that it was not a full integration. - The oral promise concerned the relocation of the Lees personally—not part of the corporate asset sale—making it a separate, collateral agreement. - Given the Lees only owned 50% of Capitol City and were not the only shareholders, the personal promise was not necessarily something that would be expected in the corporate sale contract. - The long-standing relationship between Harold Lee and Yogman and the informality of their agreement suggested a different type of trust-based business practice, which supports the likelihood of a collateral oral agreement. - There was no contradiction between the oral agreement and the written contract; the former dealt with future employment/distribution arrangements, the latter with the sale of business assets. --- **Conclusion** The court **affirmed** the trial court's judgment, holding that the oral agreement was not barred by the parol evidence rule and was sufficiently definite to be enforceable.

Answer 92

Are there 2 agreements? The timing: - was it before, after or contemporaneous. - was it written or oral? Did the second agreement have it's own consideration? - Is it integrated fully or partially? - Is there a contradiction? If the parol evidence is going to be admitted, the original contract MUST NOT be fully integrated. Consider using the phrase "this is the entirety of the agreement" which is a merger clause/integration clause. This would mean that PER would not be allowed.