Contracts II

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  1. Parole Evidence Rule (What gets in?)

    *only applies if there is a writing w the intent that embodies final expression of their bargain

    **prohibits the introduction of evidence, agreements, or concessions that are prior to or contemporaneous with the written k

    ***doesn't apply to written k
  2. Parole Evidence Rule (What gets in?)

    3 Key Questions: 
         1. Is there a writing? §209
             *Partial/Complete Integration
    • R2d§209
    • *integration - put into writing; no integration, PER doesn't apply & all evidence gets in

    • **complete integration - everything is addressed in written k (cant contradict; cant add anything into written k §215)
    • ->can try to get evidence of side/separate k in, but need separate consideration
    • ->merger clauses strengthen presumption of complete integration, but doesn't prove outright

    **partial integration - stuff left out; cant bring in diff terms, but add'tl consistent terms ok
  3. Parole Evidence Rule (What gets in?)

    3 Key Questions: 
         1. Is there a writing? §209
            *if there is a writing...
    *if there is a writing:

    • **Can §214
    • ->explain, clarify, define

    • **Cannot §215
    • ->contradict the writing

  4. Parole Evidence Rule (What gets in?)

    3 Key Questions:
         2. is the writing complete §210
            *partial v. complete
    • *if the writing is intended as a final expression= complete & no PER
    • **§216 - if the writing is a partial integration, it cannot be contradicted, but can be supplemented w consistent additional terms 

    • ***to determine if partial/complete (SPLIT)
    •     *Old/NY/PA Rule - look @ 4 corders of doc, if it looks complete, judge doesn't look @ PE
    •     **Modern/Traynor/CA Rule - judge looks @ PE to decide if it should be admitted to clarify intent of parties
  5. Parole Evidence Rule (What gets in?)

    3 Key Questions:
         2. is the writing complete §210
             *Subsequent Modification
    *Reformation - ct can reform written k & make it correspond w the intent of the parties; mistake must be mutual btwn parties

    **Subsequent Modification - Not subject to PER; Oral modification clauses generally ok bc k law is private law & parties can mutually change k at will

    ***behavior of parties doesn't modify k, constitutes waiver for times parties voluntarily acted conversely to the k
  6. Parole Evidence Rule (What gets in?)

    3 Key Questions:
         3. Is the writing clear?
            *Plain meaning rule
    • *vagueness - when word's applicability in marginal situations is uncertain (green..shade?)
    • **ambiguity - when a word has 2 different connotations (light...color? weight?)

    • ***Plain Meaning Rule - look @ terms to see if it is clear
    • ->2 stage process:
    •    *judge determines if language in written k admits only 1 plausible meaning; if unambiguous, use plain meaning of terms
    •    *if ambiguous - ct interprets k's language; Traynor/Modern - can look @ PE to interpret
  7. UCC & PER
    *UCC 2-202 - look @ extrinsic evidence unless info would've been unquestionably included in written k

    • *UCC 2-209 - if clause not allowing modification w/o signed writing, can only be modified w signed writing unless btwn merchants
    •    **behavior doesn't modify=waiver; estoppel can trump this=reasonable notice
  8. Interpretation of the terms

    Order of Authority §203(b) & UCC 1-103
    *if parties attach diff meanings to same terms, ct will interpret to explain, clarify, define

    • **Order of authority for clarification
    •    *Express terms
    •    *course of performance §2-208(1) - how parties actually execute k 
    •    *course of dealing §1-205(1) - if parties had deals before, how they acted in those ks
    •    *trade usage §1-205(2) - 2 questions:
    •       **? do the terms of the k commonly mean in the trade?
    •       **geographic scope
  9. Interpretation of the Terms

    Whose meaning prevails?
    *interpret k using parties intent; if parties use same term & meant same thing, that's what the term means

    **§201(2) - 1 party in a better position to avoid confusion bc know/should've that the term has more than 1 meaning, he bears the risk; lesser positioned party's meaning prevails

    • ***neither party is bound to meaning of other
    •      ->if neither party at fault for mistake bc there is no reasonable basis for choosing 1 meaning over the other, then no k
  10. Supplementing the K

    Gap filling
         *R2d §204
         *UCC §2-305
    *§204 - when parties have k, but didn't agree to essential term, ct will supply a reasonable term in the circumstances to make k workable

    **§2-305 - apply when parties left non-material term out; gap fillers are default provisions
  11. Supplementing the K

    Implied Warranties
    *Fitness for Particular Use
    *UCC §2-314 - Implied warranty of merchantability - seller is merchant of goods of that kind, k auto inc that goods are fit for ordinary use for which they are intended

    *UCC §2-315 - Implied warranty of fitness for particular use - protection for buyer that intends to put good to non-standard use; when merchant knows/shoul've that buyer is using goods for particular purpose & expressly states the product is good for that purpose

    • *UCC §2-316 - can disclaim implied warranties 
    •      ->language must mention merchantability, writing must be conspicuous, must give good fair notice to consumer
    •      ->exception - parties bargain for disclaimer or if meets 2-316, can still be invalid if against public policy
  12. Content of the K

       *effect §364
       *adequacy of consideration §79
    *ct has limiting principles to prevent enforcement of unequal bargains; if k is grossly inequitable, do it @ time of contracting (prospectively)

    **§364 - effect of unfairness - equitable remedy refused if relief would be unfair bc: 1 k induced by mistake/unfair practices or 2 exchange is grossly inadequate or terms of k are unfair

    • ***§79 - adequacy of consideration/mutuality of obligation - if req't of consideration isn't met, no add'tl req't of:
    •      ->gain,advantage,benefit to promisor or loss, disadvantage, or detriment to promisee; OR
    •      ->equivalence in values exchanged (mutuality of obligation)

    ***McKinnon - when equitable remedy sought, if k is just unfair, no remedy; if grossly unfair, bad enough to be unconscionable, invalid
  13. Content of the K

    Standard Form K §211
    K of Adhesion
    • *§211 - Standard form K - prewritten k (by repeat player) bc more efficient
    •    ->Part 1 - if you sign something, you're responsible for its contents
    •    ->Part 2 - ct will interpret standardized form the same for everyone who signs
    •    ->Part 3 - if party who drafted form knew/should've that other party wouldn't have signed if knew a certain provision was in it, then that provision is out (addresses unfair surprise)

    **K of adhesion - 1 party in bargaining position where can take it or leave it

    ***can have 1 or both types of k; when both, party may impose questionable terms on other party w/o other party having ability to negotiate...doesn't make k unenforceable, just heightened scrutiny
  14. Content of K

    Standard Form K & K of Adhesion
    • *Scissortail - 2 part test of enforceability:
    •      ->if there is something part of k that is unfairly surprising/unduly oppressive=out

    • *O'Callahan - Dissent Factors of void clauses:
    •    ->importance which subj has for physical & economic well being of group agreeing to k
    •    ->bargaining power
    •    ->amount of free choice exercised in agreeing to clause
    •    ->existence of competition btwn group to be exempted
  15. Content of K

    Unconscionability R2d §208 & UCC §2-302
    *denies enforcement of K (or term in K) if oppressive/grossly unfair to other party

    • **§208/§2-302 - unconscionable k/term - if ct, as matter of law (legal fact ?) finds k unconscionable, ct can:throw out entire k; excise unconscionable part; adjust unconscionable part to make it conscionable 
    •    ->Factors:
    •       -weakness in k process (fraud/other invalidations)
    •       -if no man in senses & not under delusion would accept
    •       -unfair/gross imbalance
    •    ->Test: principle of prevention of oppression & unfair surprise (ok to allocate risks, but not if oppressive/unfairly surprising; ok to use superior bargain power, cant abuse it)
  16. Content of K

    Good faith
    *duty (SPLIT)
    *best efforts
    • *UCC §1-201 - good faith - honesty in fact in the conduct/trans; not what should've known, what actually knew; only req'd one in k, not during negotiations
    •    ->cant set out to intentionally harm other party, if have independent business rationale & other party harmed unintentionally, ok

    • **R2d§205 & UCC§1-304 - duty of good faith 
    •    ->SPLIT
    •       *Old - must act in good faith & fair dealing; if merchant, must be honest in fact & act consistent w standard of fair dealing in trade
    •       *New - higher standard of honesty in fact & observance of reasonable commercial standards of fair dealing now applies to everyone (not in all jxn, CA yes)

    *best efforts - higher standard than good faith; if k says best efforts, have to treat their interest even w own
  17. Content of K

    Good Faith
    *Trade Usage UCC§1-303
    *§1-303 - Trade Usage - when looking @ good faith, look @ standard business practices (course of performance/dealings/usage of trade)

    *k silent on termination, terminable @ will by either party; BUT if abrupt termination will cause undue hardship on other party, ct can interpret good faith as requiring notice; if substantial investment from other party, cant just terminate, must give notice & opportunity to recoup investment @ reasonable profit
  18. Unenforceable Ks

    *Illegal Ks
    *Judicially Created Public Policy §178
       ->restitution §197
       ->bases of policy §179
    *covenants not to compete
    • Illegal k
    • *k by D to pay P for inducing public official to do something
    • *k to do illegal act
    • *k that contains illegal subj matter/closely related to illegal subj matter that makes performance illegal

    • **§178 - Public Policy Factors - k/term unenforceable bc pub policy if interest in enforcement outweighed by pub policy against enforcement, ct looks @:
    •    ->parties' justified expectations
    •    ->forfeiture that would result if enforcement denied
    •    ->public interest in enforcement
    •   *§197 - restitution - party has no claim in restitution for performance under/in return for promise unenforceable on grounds of pub policy unless denial would cause disproportionate forfeiture
    •    *179 - bases of policies against enforcement - ct can derive pub policy from: legislation relevant to policy or need to protect public welfare
  19. Performance & Breach of K

    Conditions §224
    • *§224 condition - event, not certain to occur, which must occur, unless its nonoccurence is excused, before performance under the k can be due
    •    ->express condition - conditions written into k by parties; strictly construed, but exceptions (ie. estoppel)
    •    ->constructive condition - conditions put into k by court (by the ct construing the k)
  20. Performance & Breach of K

    *Mitigating Doctrines
       **Waiver, Estoppel, & Election
       **Interpretation (excuse)
    • Prevention
    • *If I prevent the occurrence of a condition, I cant use that as an excuse for non-performance

    • Waiver, Estoppel, & Election
    • *Waiver - 1 party doesn't perform condition under terms of k for multiple occasions & other party doesn't object, there was waiver for those occasions 
    • *Estoppel - if condition is waived repeatedly & there is reliance on repeated waiver, you eventually cant enforce the condition 
    • *Election - choice, binding on the party that makes it, whether to disregard the nonoccurrence or not

    • Interpretation (excuse)
    • *who can excuse a condition?
    •   **party protected by the condition can excuse
    •   **ct can excuse condition (have broad latitude & discretion so ct can make k fair; equitable override opportunities for the ct)
  21. Performance & Breach

    Doctrine of Constructive Conditions (DOCC) §237 & §238
    *Who goes first?
    Kingston - gave us DOCC - in a bilateral k, each party is conditioned on the performance of a reciprocal obligation of the other party

    • Who Goes First?
    • *if the k says, then its enforced
    • *if k is silent, preference for simultaneous exchange
    •   **§234 - if simultaneous exchange isn't possible, then faciendo ante dando, work before you get paid
  22. Performance & Breach

    DOCC §237 §238
    *Mitigating DOCC
       **Substantial Performance R2d §241
       **Perfect Tender Rule UCC §2-601
    Mitigating DOCC

    • *R2d §241 - Substantial Performance - breach is major, then no sub. perform.; breach minor, then sub. perform. 
    •   **Material Breach Factors
    •      **Extent the injured party will be deprived of expected benefit v. extent can be adequately compensated for deprivation
    •      **extent to which breaching party will suffer forfeiture
    •      *likelihood of breaching party will cure (taking tot of cir & any assurances)

    • *UCC §2-601 - Perfect Tender Rule 
    •   **if goods or tender of delivery fail in any respect to conform to k, buyer may:
    •      ***reject whole; or
    •      ***accept whole; or
    •      ***accept any commercial unit(s) & reject the rest
    •   **not like sub perform test; but cant be super small defect; goes to quality of goods & shipment
    •   **§2-606 - acceptance - can be express/by paying for goods or by exercising dominion, doing acts inconsistent w seller's ownership
    •   **softened: 
    •      ***§2-508 - if seller delivers goods before time of performance has expired & buyer rejects, seller gets opportunity to cure before deadline
    •      ***§2-608 - applies only when seller makes tender of goods & buyer accepts goods; PTR doesn't apply anymore; if buyer wants to reject, now have to meet higher test that substantial nonconformity impairs value of goods for buyer
    •      ***§2-612 - if installment k, PTR doesn't apply, even from beginning; fault, flaw, defect, or unconformity must sub impair value of goods for buyer
  23. Performance & Breach

    DOCC §237 §238
    *Mitigating DOCC
      **Divisibility R2d§240 & UCC §2-612
      **Restitution R2d §374
    Mitigating DOCC

    • *R2d§240 & UCC§2-612 - Divisibility - treat subdivided portions of k as if entire k, if major breach in 1 section, doesn't mean major to whole k
    •   **test of divisibility - whether each part of k has independent utility; prep for k doesn't have independent utility (some ks, like construction, look divisibile, but aren't)

    • *R2d§374 - Restitution - quasi k/k implied by law - ? whether there was enrichment & whether it would be unjust to allow recipient to keep it
    •   **can happen:
    •      ***if there isn't a k, or
    •      ***if there is a k, but enforcing it is unjust or if party has failed to sub perf (sub breach & not divisible k), instead of assigning value to damages caused & deducting obligation to pay, act like there was never a k & then assign value to what was conferred
    •   **R2d§371 Ways to measure restitution
    •      ***cost avoidance - reasonable value of what was received in terms of what it would've cost to get it from someone in claimant's position
    •      ***net enrichment - amt that other party's prop has increased in value/interests are advanced (breaching party can never get more than k price)
  24. Performance & Breach

    Breach During Performance §236-§243
    • *If there was a breach, look @ whether major/material or minor/immaterial (breach victim should be careful not to overreact..)
    •   **If minor, victim must treat as partial & continue performance; but can get damages
    •   **If major, victim has 3 options:
    •      ***treat as partial, continue perform & get damages
    •      ***treat as total, cancel k & sue
    •      ***suspend performance & await cure
  25. Performance & Breach

    Pre Performance
    *Anticipatory Repudiation - R2d§250 & UCC§2-610
    *When there is AR - R2d§253
    Nullifying/retracting AR - R2d§256 & UCC§2-611
    Anticipatory Repudiation

    • *R2d§250
    •   **can repudiate by deed - must be voluntary & affirmative action; no AR if just willful failure to get ready, grounds for insecurity, but no AR
    •   **can repudiate by statement - stmt indicating intent not to perf OR can be stmt that will perf, but on diff terms OR a distinct/positive stmt of inability to perf

    • *UCC§2-610 
    •   **ANY announcement of intent not to perform; lang must be able to be interpreted of positive intent not to perform

    • *R2d§253 - when there is AR
    •   **Hochster - when AR, 'ee can treat as breach now, wo waiting until law day, or can wait until law day (but be careful bc mitigation)
    •      ***§243(3) - if only outstanding obligation is to pay $ in installments, this doesn't apply (uni k)
    •   **Kanavos - in order for there to be AR, 'ee must actually have ability to perform their side of the k; if cant, no AR
    •   **Cosden - as sub matter, when seller breaches by AR, buyer gets K market differential
    •      ***when do we interpret market price? wait 2 periods: if 'ee gives 'or option to revoke AR, have to wait that time & @ end of that period, 'ee must have time to cover

    • *R2d§256 & UCC§2-609 - Nullifying/Retracting AR 
    •   **AR - like an offer of a breach, if you rely on that promise or accept their AR, then AR cant be retracted (something short of AR gives rise to insecurity, can ask for assurance)
  26. Performance & Breach

    Pre Performance
    *Assurance of Due Performance - R2d§251 & UCC§2-609
    *where reasonable grounds arise to believe obligor will commit breach, obligee may demand adequate assurance of due process

    *UCC - demand for assurance must be in writing, waiting time limit 30 days, if no response (or if inadequate), then there is AR (can turn what wasn't AR into AR)

    *NOT the same in R2d; may suspend performance until receives assurance for what hasn't been received
  27. Remedies for Breach

    Specific Performance - R2d§357 & UCC §2-716
    • *Injunction - ct ordering party to stop breaching k
    • *not preferred by cts; only grant if $ can't fix prob/not quantifiable/if only 1 source of goods at issue (1 of a kind/unique)
    • *cant get an equitable remedy based on grossly inequitable k
  28. Remedies for Breach

    Measuring Expectation R2d§347 & UCC§2-793&§2-711
    *Seller's Remedies - UCC§2-706 - §2-709
    *Buyer's Remedies - UCC§2-712 - §2-716
    *ct wants to put injured party @ SQA; give benefit of bargain (minus costs..)

    *R2d§347 - damages = loss in value + other loss (incidental/consequential) - cost & loss avoided

    • *Seller's Remedies
    •   **§2-706 - Resale - buyer breaches, seller resells goods, gets $ from buyer if gets less for goods than k price (actual sub trans)
    •   **§2-708(1) - K Mkt Differential - hypo sub trans (difference btwn mkt price & K price)
    •   **§2-708(2) - Lost Volume Seller - I show that the sub trans of goods wasn't sub, I would've sold both & gotten profits from both if k not breached (profits could've made)
    •   **§2-709 - Specific Performance - technically not equitable remedy, $ damages, but equivalent of buyer's specific performance; in kind

    • *Buyer's Remedies
    •   **§2-712 - Resale - seller breaches, reasonable purch price of goods in sub for those due from seller; recover cost of cover only if exceeds k price
    •   **§2-713 - K Mkt Diff - if mkt price above k price, damages diff btwn addt'l amt over k price
    •   **§2-716 - Specific Performance
  29. Remedies for Breach

    Limitations on Damages
    *Avoidability - R2d§350
    *Diminished Value Rule - R2d§347-§348
    *Foreseeability - R2d§351 & UCC §2-715
      **direct/consequential/incidental damages
    *Certainty - R2d§352
    *Emotional Distress - R2d§353
    *Liquidated Damages Provisions - R2d§356 & UCC§2-718
    *R2d§350 - Avoidability - aggreived 'ee not allowed to recover loss that could've avoided

    • *R2d§347-§348 - Diminished Value Rule - alt to cost of repair, replacement, completion; appropriate when defect embedded;
    •   **if cost of RRC grossly diff btwn diminished value resulting from breach, damages diff btwn value of thing promised & thing delivered

    • *R2d§351 & UCC§2-715 - Foreseeability - to recover, damages must have been foreseeable w/in contemplation of parties @ time of k
    •   **party who later breaches must've been able to foresee @ time of k that the kind of damages that was caused could've resulted from breach
    •   **direct damages - flow naturally from breach itself; I breach & damages would've been suffered by anyone in shoes of victim; presumed foreseeable
    •   **consequential damages - ripple effect damages; result of breach in combo w/use victim intends to make w/use of product in contro; damages depend on foreseeability
    •   **incidental damages - $ spent arranging sub transaction

    *R2d§352 - Certainty - damages aren't recoverable for loss beyond amt that evidence permits est'd w reason certain; need enough so that fact finder isn't just making up some #, just a basis for assigning value to claim

    *R2d§353 - Emotional Distress - generally don't recover for this for breach of k; except if breach in public/defamatory way (esp w funeral homes)  

    *R2d§356 & UCC §2-718 - liquidated damages provisions - (what happens in breach) permissible as long as reasonable; also encouraged, 2 basis: freedom of k & keep ppl out of ct
Card Set:
Contracts II
2013-04-19 03:12:36
Contracts II

Contracts II
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