CONTRACTS OUTLINE 2005 PAROL EVIDENCE AND INTERPERETATION DEFINITIONS: Parol Evidence Rule: We are limited to the 4 corners of the paper the agreement is written on in interpreting an K. Parol Evidence – Generally: Extrinsic evidence that shows agreement on an additional provision or interpretation made prior or contemporaneous with the written K. (Is it additional provisions or just interpretations?) Extrinsic Evidence: evidence outside the document used to influence the interpretation of terms in a K. Total Integration: The K is the final and complete expression of the parties agreement then it is protected from parol evidence being used in interperetation. Partial Integration: The K is not the final expression and is open to interpretation by extrinsic evidence. ANALYSIS: Methods to determining Full v. Partial Integration A) Williston a. Integration Clause is conclusive evidence b. Look to writing – is it incomplete on face c. If looks complete, then default total integration - unless a reasonable person would naturally enter into the additional terms, then partial integration B) Corbin a. DETERMINE INTENT OF PARTIES regarding partial v. total integration. b. Merger Clause not conclusive- just a factor c. Liberal Admission of extrinsic evidence C) UCC a. Merger Clause is strong evidence of total integration b. If no Merger Clause – a presumption of partial integration unless it is clearly total. Admitting Parol Evidence and Interpreting it: A) The K must be a partial integration 1) When there is ambiguity it is given the intended meaning of each party.
a. If the meanings are different and it is a material difference then no K. 2) Past Trade Practice may establish terms not in K a. Can’t be in conflict with written terms of K. 3) UCC: No contradiction of a written agreement by previous or contemporaneous agreement no recorded on face of K, however a. An Explanation of the terms may be given by: i. Course of dealing or usage in trade ii. If not a final integration, then consistent additional terms may be included. CAPACITY OF THE PARTIES Minors: Can void any contracts in the names unilaterally. HOW: 1) While still Minor, or w/in reasonable time after age of majority 2) Real Estate – can’t disaffirm until age of majority 3) Disaffirming irrevocable 4) Cannot disaffirm in part Minor as Defendant: 1) (Trad) No Obligations 2) (Mod) Obligation to return item if not used up. a. Traceable Benefit must be returned 3) Food, Clothing, Shelter – Minor Liable for it. Liable for: a. (Maj.) The intended use b. (Min.) The actual use Minor as Plaintiff (Disaffirms and sues to get money back) 1) (Trad.) Give item back get money back. 2) (Maj.) If disaffirms must pay for wear and tear and bring item back. 3) (Small Maj.) Must pay restitution. Ratification of a Minor’s Contract Once a minor turns age of majority can ratify bu: 1) Conduct, or 2) Express Instrument Generally a parent cannot bind a child to a K Exception: If guardian Ad LItem – court given power of attorney
Mental Incapacity (Trad) – If incompetent to understand the nature of the transaction then the K is voidable by the incompetent. (2nd Rest) – Voidable if person unable to act in a reasonable manner and other party has reason to know MISTAKE Mutual Mistake 1) Both parties make a mistake of fact 2) Mistake Material 3) The one seeking K avoidance can’t have consciously been “ignorant” of the mistake. Unilateral Mistake (Trad.) – Voidable if the party seeking to void K: 1) didn’t know a fact, 2) but other party did, 3) it was material, 4) and the party in the know didn’t disclose 5) causing the mistaken party to rely on the non-disclosure. (Rest.) – Same with the following additional elements: 6) contract enforcement is unconscionable 7) Parties can be restored to original condition Mistake of Law Generally – each party responsible for knowing the law. Exception: 1) Unilateral Mistake 2) No conscious ignorance Mistake in Performance Same as Unilateral Mistake. REFORMING A CONTRACT When a K is voidable because of: 1) Duress 2) Undue Influence 3) Misrepresentation 4) Mistake Court may grant equitable remedy by re-writing the contract to make it fair. UNCONSCIONABILITY
1) Adhesion 2) Duty to Read Remedies: 1) Voidability 3) Excise unconscionable part 4) Re-write CONDITIONS Condition = Promise Modifier – An Act or Event that affects a duty to render a promised performance. Conditions either occur or do not occur. TYPES OF CONDITIONS 1. Express Conditions – Written and enumerated, or Types of Express Conditions: 1) Condition Precedent – ripens a duty to perform 2) Condition Subsequent - discharges a duty to perform All strictly construed. 2. Implied in Fact Conditions – Not written in K, but implied from the terms of the K. Treated as Express Conditions. Ex. A promised to paint B’s house and B promises to provide the paint. B’s providing the paint is an implied in fact condition precedent to A’s duty to paint. 3. Implied in Law Conditions (aka Constructive Conditions) – Mutually dependent promises. Not strictly construed – rather measured by Substantial Performance. Occur in Bilateral Agreements where mutual independent promises (that is they are not contingent on each other’s completion to be able to perform) have been exchanged. There is an implied order to performances (i.e. A performs, B pays). PERFORMANCE Express Conditions are strictly construed. Failure of a condition means a duty never ripens and performance is excused. Failure to perform an independent promise may not excuse the other parties duty to perform their independent promise.
Substantial Performance – Required before duty ripened to pay for performance. (Old CL) – All Promises Independent, so if one party failed other still had to perform. (Mod) – Promises may be dependent. If A fails to substantially perform B never has a duty to pay if payment was conditioned on performance. Perfect Tender Rule – Buyer may if not a perfect tender: A) Reject the whole lot, or B) Accept the whole, or C) Accept part and reject Part Buyer can reject accepted goods if discovers defect w/in a reasonable time. Installment Sales A) Separate shipments can be accepted individually.
Part Performance (less than substantial) (trad) – No payment for partial performance. Exceptions – Contractor not at fault Personal Service K’s (2nd Rest) Pro-Rata Payment offset by Damages. If breach willful any payment may be barred. Damages = 20% in damages or $500 whichever less. Breach: Partial - If A substantially but not totally performs, there is an nonmaterial breach that usually is settled with a payment setoff. If the other party fails to perform what do I do? Determine if I have to start or continue performance 1) Is my promise subject to any express condition? i. If Yes, and condition not occurred then I can cease and desist. ii. If Yes and condition occurred I must perform. 2) Is Promise to Perform an Independent Promise? i. If Yes, must perform ii. If No, go to step three.
3) Was there substantial performance of a dependent promise or otherwise non-material breach by other party? i. If Yes, Must perform ii. If No, see step 4. 4) Has other party’s breach been cured or not lasted beyond a reasonable time? i. If Yes, not a total breach and I must perform once cured. ii. If no, material breach has become a total breach and I can sue for breach. Waiver: An Intentional relinquishment of the effect of the condition. Waiver prior to K formation: When condition enumerated in K, and waiver prior to K was oral, but one party relied on oral assurance of waiver – we have detrimental reliance and the other party is estopped from enforcing the condition. This is an exception to the parol evidence rule. Waiver after K formation but before occurrence If condition material to K’s central exchange: Waiving the condition is a change to a pre-existing duty and requires additional consideration or promissory estoppel. If condition immaterial to K’s central exchange: No additional consideration needed. Examples: Time of performance Manner of Performance Giving Notice Waiver after failure of a condition Party in whose favor the condition runs has the option to cancel the K, but may “Elect” to waive it– and is binding without additional consideration such that the K can no longer be cancelled. Ex. A K with an express condition on time limit for performance. Repeated Waivers – generally does not waive future conditions. Relief from Forfeiture – If what’s being given up because of the failure of a condition is unconscionably large courts will grant equitable relief. Contract Divisibility:
Logical components of a master K can be broken apart into constituent agreements if different types of work. Wrongful Prevention and Non-Cooperation Duty to operate in good faith and fair dealing. A) Wrongful hindrance is grounds for relief. B) Courts may void a condition precedent for this reason. Conditions of Satisfaction Express Condition of Approval – Generally 1) Re: Mechanical Items - Courts will use objective standard of reasonableness to see if the conditions are satisfied. 2) Re: Taste and Judgment – courts looks to subjective satisfaction. i. Must be good faith dis-satisfaction To the satisfaction of a 3rd Party: (Usually with construction contracts to satisfaction of Architect) (Maj). Subj. Standard, court will not second guess 3rd party opinion (Min). Same, except if facts & circumstances show bad faith, then will rule against 3rd party. (S. Min.) Objective standard of reasonableness applied to 3rd parties.