Contracts II Outline PDF

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Contracts II Outline A. Parol Evidence- if the parties have taking the time to put their agreement in writing and they sign it, then this is the best evidence to the contract. If you say there is something of the agreement that is not in writing, then parol evidence will keep it out. Anything that was agreed to, that was not in writing, it is left out. a. How to determine if parol evidence comes into play or not? i. We have a WRITTEN contract ii. There are problems that arise with the K is the writing the contract by itself? Or is the writing + something else+ contract iii. Issue: when can a term that is outside the writing be added into the writing to become part of the contract? 1. THE PER IS A RULE OF EXCLUSION- if the PER does NOT apply, then the evidence is admissible. a. Total integration- the writing is final, and is the complete written expression of the party’s agreement i. Consequence- the writing not only may not be contradicted by extrinsic evidence, it may not even be supplemented by consistent, additional terms b. Partial integration- the writing is final, BUT it is NOT the complete written expression of the parties i. Consequence- you may not contradict the writing, but you may supplement the writing by extrinsic evidence, oral written that is by consistent additional terms. c. Unintegrated writing- not the final, written statement of the parties. i. Consequence: the PER does not apply at all b. How to determine if there is total or partial integration? i. Williston view (common law)- if merger/ integration clause exists (this writing contains all the terms of the agreement of the parties) presumes integration is total, unless merger/ integration clause obtained by fraud, mistake. We don’t want you to look at anything else but this agreement. 1. If there was no merger clause- issue: this oral agreement, would it be something that would naturally be in the contract. a. Ask: would it have been natural for the parties to have included the term in the writing

i. Yes- total integration- nothing gets to come in ii. No- partial integration- the terms get to come in as long as they do not contradict the contract c. UCC view (2-202) (sale of goods)- assumes that a writing is a partial integration (you may not contradict the writing, but you may explain and supplement it by consistent additional terms) unless the judge finds the writing to be the complete & exclusive statement of the parties’ terms… total integration. The written contract is not the only contract that there is. Assumes everything is partial. i. Would the parties "certainly" have included the terms. 1. If yes- then it should have been in the contract, and if it is not in the contract it does not come in now 2. If no- partial integration B. Circumstances where PER does not apply a. Evidence on whether the writing is integrated b. Statement/ agreements after the writing (we have a contract, after we entered to the contract we agreed to something else) c. Evidence to interpret a writing d. Evidence show that a condition to formation of contract exists e. Evidence to show matters of avoidance i.e.- fraud, duress, mistake etc... Exists C. How to approach a PER issue a. First issue does common law, or common law supplements with the UCC applies b. Second issue is whether the oral conversation is admissible in evidence i. Is the contract in writing? ii. Is the contract integrated (final expression of the parties)? iii. Does any of the five exceptions apply c. If the question is yes, yes, then no then PER applies i. The next question is whether this contract is totally integrated or partially integrated 1. For UCC first assume that the writing is partially integrated, so it cannot be contradicted. a. Whether the extrinsic evidence concerns course of dealing or course of performance or usage of trade (they are always admissible) 2. For Williston- if there is a merger clause, nothing gets to come in. if there is not a merger clause, then answer the question a. Is this oral agreement something that would naturally been in the contract? i. Yes- does not get to come in. ii. No- then it can come in as long as it does not contradict the contract

D. Interpretation- if there is uncertainty or ambiguity in the written agreements term 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. If the meaning of the agreement is plain, parol evidence is inadmissible. a. If interpretation does not require the introduction of evidence i. Take into account the circumstances surrounding the making of the contract ii. Take into account the principal purpose of the contract iii. View the contract as a whole iv. A reasonable, lawful, or effective interpretation is preferred to a literal illegal or unusual v. Favors the public vi. Utterances are to be interpreted most strongly against the party responsible for them vii. Look at the subsequent conduct of the parties to assist in interpretation viii. An earlier tentative agreement will be rejected in favor of a later final expression ix. Absent a contrary intent: 1. Ordinary/popular words are to be given their normal meaning 2. Technical words or terms of art are to be given their special meaning 3. Established legal words are to be given their precise meaning 4. Words of trade, locality, or profession ate to be given their practical meaning ii. Absent contrary intent, inconsistency in terms are to be resolved by 1. Specific terms qualify general terms 2. A word or phrase is to be interpreted in the same way throughout the contract 3. Correct obvious mistakes of grammar and punctuation 4. Spelled out numbers take precedence over Arabic numbers. For example, writing a check for $200 but writing in words $20, the $20 takes precedence. b. if interpretation of an integrated writing requires the introduction of evidence, there are at least three approaches to determine whether the evidence will be admitted: i. Four corners approach: in interpreting a writing, the express language found within the four corners of the writing, if unambiguous, determines the intent of the parties and parol/extrinsic evidence is inadmissible to expand, vary, or explain the writing unless there has been fraud, mistake ambiguity, illegality, duress, or undue influence. (minority view 1. The two- step approach: a. Proffer evidence to the judge to demonstrate that the writing is ambiguous b. if the judge agrees that there is an ambiguity, introduce evidence into the record to explain the ambiguity.

ii. UCC (2-202)- terms in an integrated writing may be explained/supplemented by, inter alia, course of dealing, course of performance, trade usage. E. Conditions- a contract may provide that a party does not have a duty to perform unless some condition is fulfilled. In such a case, the party’s failure to perform will normally be justified if the condition was not fulfilled. Go through the process of conditions when common law applies a. Distinction between a promise and a condition- it is important to understand that there is a difference between whether a party is bound under a contract and whether a party who is bound has come under a duty to perform. i. Promise- a commitment to do or refrain from doing something. If a promise is unconditional, the failure to perform according to its terms is a breach of contract. If the promise is not fulfilled breacher can be sued for damages. ii. Conditions- an event or state of the world that must occur or fail to occur before a party has a duty to perform under a contract or an event or state of the world the occurrence or nonoccurrence of which releases a party from its duty to perform under a contract. If not give rise to liability, no longer has a duty to do something. iii. Express conditions- a condition is expressed if the language of the contract on its face articulates the intent to make performance contingent on the event. 1. Condition precedent- something has to happen first before we can have a contract. The burden of proof is on the moving party. If you get an A in my contracts class, you are my TA 2. Condition subsequent- something happen to discharge the obligation. The burden of proof is on the non-moving party. "you are my TA unless you do not get an A in my class a. If the court determines a condition is a condition subsequent, it shifts the burden of proof. 3. Condition concurrent- to the degree the parties can perform at the same time, they should. a. Tender- an unconditional offer the perform coupled with the demonstration ability to carry out the offer of performance and to product the subject matter of the tender i. UCC (2-507) Tender is a condition precedent, you must provide the goods before I must pay) ii. UCC (2-511)- unless otherwise, seller can pay first iii. Basically 2507 and 2511- create a condition concurrent

4. Constructive conditions- only kick in if you want something to happen exactly the way that you wanted, there is a condition, and the court construe the contract. a. Condition satisfaction- one party of a contract may wish to have some discretion in evaluating a future state of affairs before rendering her own performance. To achieve this, the party could have a term included in the contract making her satisfaction with the specified state of affairs a condition precedent of her performance. i. Commercial- anybody can do ii. Personal- tailored to you iii. Professional- third party will inspect the work b. Pay if pay when- you get paid when I get paid c. Time is of the essence- you have a strict date to complete the job iv. did the parties intend and express condition or promise? 1. What are the rules used to determine whether it’s a condition or promise? 2. What are some of the words that MAY indicate the parties intended a condition a. On condition that, if subject to, provided that, unless, so that, as soon as, after 3. If it’s an express condition- it was written in the contract 4. Implied in fact- our conduct creates certain contracts v. Promissory conditions- a failure to complete/ perform a promissory condition constitute both a breach of a promise and nonfulfillment of a condition. 1. Promisee can sue for damages for breach 2. Withhold on their performance vi. Establishing breach of promissory conditions 1. Determine the existence and context of the contractual undertaking and extent of the promise that was made 2. Establish the date that the promised performance fell due

3. Decide if the performance complied with the promise 4. Severity of the breach and on the promise’s rights in reacting to the breach vii. Substantial Performance- if a breach is not material, it is necessarily partial and the performance that has been rendered is substantial. 1. If the breach is not material so that the promissory condition is substantially performed, the doctrine of substantial compliance with the condition will also apply. Which means, the promisee cannot withhold performance or terminate the contract, but is entitled to claim any damages suffered as a result of the breach. 2. If the breach for promissory condition can be cured- the promisee cannot immediately sue for damages. However, the conditional nature of the breached promise allows the promisee to suspend her own performance until such time as the condition is fulfilled by cure. a. Material- has a substantial performance and did the work as the party wanted it b. Non-material- what the party did not do c. *will never have a material breach b. How to answer a question on conditions or promise i. Condition- an event not certain to occur which must occur, unless its nonoccurrence is excused, before performance is due. a. Effect- if a condition is not met, no liability attaches to the party- very harsh remedy ii. Promise- contractual undertaking a. Effect- breach of promise, can sue for damages 2. If it is a condition- what type of condition is it? a. Precedent i. Satisfactory

1. Personal- subjective standard, if the party of the party of the contract likes it 2. Commercial- objective standard, anybody can do it 3. Professional- third party professional will inspect ii. Pay if pay when iii. Times of the essence b. Subsequent c. concurrent 3. Are there any excuses to conditions made by the non-breaching party that caused the other party to not be able to complete the contract? If one of them are present, the law will excuse their noncompliance a. Prevention & cooperation- not cooperating or preventing the party to perform, which causes a breach b. Extreme forfeiture- to the extent that non-occurrence of a condition would cause disproportionate forfeiture, a court may excuse the non-occurrence of that condition unless its occurrence was a material part of the agreed exchange. c. Public policy- if the agreement signed was against public policy or against the law. It is unjust because of the law d. Waiver- if immaterial argue waiver. voluntarily relinquishing a right. Immaterial conditions may be waived. Prior to time of performance e. Estoppel- if it is material argue estoppel. person precluded from asserting a right. Can be used for material conditions f. Election- if someone has a condition under a contract and they do not perform that condition, you treat it as a forfeiture, but if you do not, then it becomes an election. The difference between election and waiver, is what point performance is taking place. Occur after condition. Once

they decided to ignore a forfeiture, they cannot come back and act on it g. Impossibility- a condition may be excused if there is an unexpected and unforeseen event that makes performance impossible. 4. If none of the excused are present, then there is a breach and the party that did not fulfill the condition gets nothing 5. If it is a promise- first thing to establish is who goes first (if that is not indicated by the parties, either the party that needs a longer time to fulfill the promise goes first or they can be concurrent) 6. Unconditional promise- breach is not subject to a condition 7. If the party breach the promise- the other party would be able to sue a. That is where substantial performance comes in i. The breaching party would still get paid; however, they would be sued for the amount of damage occurred from not fulfilling the promise. F. Perfect Tender Rule (UCC article 2)- applies to conditions where it is for the sale of goods. a. Installment contract UCC 2-612)- a contract where goods are to be delivered at separate times in units from the seller to the buyer one contract for multiple delivery. i. For each installment, you can only reject if non-conformity substantially, which means that the shipment received is not in accordance with the obligations under the contract AND cannot be cured. 1. However, the seller has the right to cure 2. The only time one party can breach the entire contract is if the non-conformity of one or more installments substantially impairs the value of the entire contract. ii. Under UCC 2-609, if a party has reasonable grounds for insecurity regarding the other’s performance, they can write a demand letter for adequate assurance of due performance.

1. The other party have 30 days to respond to the letter and must respond in a manner satisfactory. a. In the meantime, while waiting on the response, the party that feels insecure can reasonably suspend any performance for which he has not already receive. b. Single delivery UCC (2-601)- one-time transaction i. This is known as the perfect tender rule. If the goods fail in any respect from the terms of the contract the buyer has some options: 1. Accept the whole (UCC 2-606) a. Acceptance occurs when the buyer: i. After a reasonable opportunity to inspect the goods, indicate goods are conforming or that goods will be taken or retained despite their non-conformity ii. Fails to make an effective rejection after having had the right to inspect iii. Does an act inconsistent with seller’s ownership (start selling the goods, or treating it like it is theirs) b. If the buyer has already accepted but now wants to revoke that acceptance (must have accepted first) UCC 2-608) i. The buyer may revoke acceptance when the nonconformity substantially impairs the value to the buyer and 1. The buyer accepted it on the assumption that the non-conformity would be cured, and it has not been seasonably cured or 2. Without discovering the non-conformity, if the buyer’s acceptance was induced by the difficulty of discovery before acceptance or the seller’s assurances ii. How do the courts determine if a buyer has the right to revoke?

1. It must be within a reasonable time after the buyer discovers o should have discovered the defect, and before the buyer makes any substantial change in the condition of the goods 2. Buyer must notify seller of it 3. Revoking buyer has the same rights and duties regarding the goods as if he had rejected them. 2. Reject the whole (but must give the seller a chance to cure) a. Rejection (2-602) i. Must occur within a reasonable time after the delivery or tender ii. Must seasonable notify the seller iii. After rejection, any exercise of ownership by the buyer is wrongful as against the seller iv. If the buyer is already in possession, the only duty that the buyer is under, is to hold the goods while exercising reasonable care for a sufficient time to allow the seller to remove the goods b. Cure (2-508) i. cure is giving the seller an opportunity to fix the issue that the buyer has with the goods. 1. The strength of the seller’s right to cure depends on whether the seller would have time to complete the cure before the date due for the delivery of the goods under the contract. 2. Permits the seller to notify the buyer of the intent to cure within a reasonable time a. Provided that the seller has reasonable grounds to believe that

the tender of delivery would be acceptable with or without money allowance- meaning they can give you something of higher quality or higher value. b. Exception: Shake and faith doctrineused in a life or death circumstance, where the product can kill you. You do not have to give them a right to cure G. Anticipatory Repudiation- is a positive expression either by words or conduct, of one party's intent not to perform when performance is due a. If there is anticipatory repudiation, the non-breaching party’s options are: i. Sue right away, they do not have to wait for the time of performance ii. Non-breaching party can suspend their own performance under the contract iii. Wait a commercially reasonable amount of time, cannot wait too long, or they become the breacher iv. Resort to any remedies for breach even if you say you will wait v. Excuse the condition of being ready, willing and able to perform 1. It is always encouraged to send a letter requesting assurance of performance H. Perspective inability to perform- where a party indicates reasonable doubts as to whether it will be able to perform a. Excuses the condition of being ready, willing and able to perform, however, you cannot sue until performance is due. i. Under the UCC must send the 2-609 letter asking for adequate assurance 1. Letter is in writing, and the other party has up to 30 days to respond, providing assurance. a. Non UCC- does not have to be in writing and response is in a reasonable amount of time

2. The breaching party can retract under UCC- 2-611 unless the aggrieved party has since cancelled or materially changed his position or otherwise indicated that he considers the repudiation final

I. Third Party Beneficiary a. a contract where a third person is to get the benefits. How to determine if there is a third -party beneficiary. i. Identify the parties 1. Promisor- made the promise that will benefit the third party 2. Promisee- Most important person to the promise, brings in the third party 3. Third party- stranger to the original contract ii. Is the TP a TPB- look for intent, what is the intent of the original parties? iii. Is the contract enforceable- look for consideration? iv. Is the TPB a donee or a creditor- donee is where the promisee is nearly making a gift, a creditor is someone the promisee owes. 1. Donee can never sue the promisee because it is just a gift v. Did the rights of the TPB vest (hybrid test)- creditor rig...