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1 George Mason School of Law Contracts II Terms This file may be downloaded only by registered students in my class, and may not be shared by them F.H. Buckley fbuckley@gmu.edu Slide 2 Next day Up to Scott 644 (Note that I will add Scott 644-59 on modification and waiver) 2 Slide 3 So now we have an enforceable contract But what is its content? 3 Slide 4 Identifying the Terms and Interpreting them Identifying: what are the terms Interpreting: what do they mean? 4 Slide 5 Oral statements and the Parol Evidence Rule In either case, do we look outside the written contract? Oral statements Course of dealings Trade customs Implied terms 5 Slide 6 Heres a thought Why not just ignore written contracts? The letter enslaves and the spirit makes free. 6 Slide 7 What would we lose if we banned written contracts? Certainty as to terms Recall the rationale for the Statute of Frauds in McIntosh p. 518 7 Slide 8 What would we lose if we banned written contracts? Certainty as to terms Adjudication and Litigation Costs 8 Slide 9 What would we lose if we banned written contracts? Certainty as to terms Adjudication and Litigation Costs Agency Costs of Sellers Agents 9 Slide 10 What happens where there is a writing? First question: Is this a binding contract? 10 Slide 11 What happens where there is a writing? Unsigned terms Birmingham TV v. Waterworks Restatement 211(1), Illustration 1 11 Slide 12 What happens where there is a writing? Is a signature dispositive? 12 Lady Gaga signs an autograph Slide 13 What happens where there is a writing? Is a signature dispositive? Restatement 211(1), Illus. 3 13 Slide 14 What happens where there is a writing? Is a signature dispositive? Restatement 211(1), Illus. 3 Recall Merit Music at 429 I imagined it was a note. 14 Slide 15 First question: Is this part of a binding contract? Non est factum: Restatement 163, Illustration 2 15 What happens where there is a writing? 15 Slide 16 So assume we have a contractbut what are its terms? 16 Identifying the terms 16 Slide 17 What is an integrated agreement Restatement 209(1) The presumption in 209(3) 17 Identifying the terms 17 Slide 18 What then is an UNintegrated agreement? 18 Identifying the terms 18 Slide 19 What is the difference between a completely and a partially integrated agreement Restatement 210 19 Identifying the terms 19 Slide 20 Can we look behind a signed written contract for the terms of the contract? Thats all new (and confusing) The traditional Parol Evidence Rule 20 Slide 21 Can we look behind a signed written contract for the terms of the contract? Thats all new (and confusing) The traditional Parol Evidence Rule Burke at 554 in Masterson Where the writing is integrated, parol evidence is not admitted to add to, vary or contradict the writing 21 Slide 22 Can we look behind a signed written contract for the terms of the contract? Thats all new (and confusing) The traditional Parol Evidence Rule Burke at 554 in Masterson Where the writing is integrated, parol evidence is not admitted to add to, vary or contradict the writing The four corners rule 22 Slide 23 Can we look behind a signed written contract for the terms of the contract? The traditional Parol Evidence Rule Burke at 554 in Masterson Where the writing is integrated, parol evidence is not admitted to add to, vary or contradict the writing Completely integrated writings: Restatement 213(1)(2) 23 Slide 24 Limits to the Parol Evidence Rule A agrees to sell his house to B in a signed agreement on Feb. 20. On the same day A sells a painting to B for $400 in an oral agreement. Problems? 24 Slide 25 Limits to the Parol Evidence Rule A agrees to sell his house to B in a signed agreement on Feb. 20. On the same day B sells a painting to A for $400 in an oral agreement. Problems? Two entirely distinct contracts may be made at the same time, and will be distinct legally. Williston at 546 25 Slide 26 Limits to the Parol Evidence Rule Two entirely distinct contracts may be made at the same time, and will be distinct legally. Williston at 546 Collateral Contracts 26 Slide 27 Limits to the Parol Evidence Rule Two entirely distinct contracts may be made at the same time, and will be distinct legally. Williston at 546 Distingish Collateral Contracts from Partially Integrated Contracts 27 Slide 28 Collateral Agreements The test in Mitchill v. Lath 546 28 Ice House Slide 29 Collateral Agreements How is this like my example of the painting? 29 Slide 30 Collateral Agreements What is the test of a collateral agreement? 30 Slide 31 Collateral Agreements The test in Mitchill v. Lath In form a collateral agreement 31 Slide 32 Collateral Agreements The test in Mitchill v. Lath In form a collateral agreement Cant contradict the written agreement 32 Slide 33 Collateral Agreements The test in Mitchill v. Lath In form a collateral agreement Cant contradict the written agreement The collateral agreement would not ordinarily be embodied in the main agreement 33 Slide 34 Collateral Agreements The test in Mitchill v. Lath In form a collateral agreement Cant contradict the written agreement One that would not ordinarily be embodied in the writing What was the oral agreement here? 34 Slide 35 Collateral Agreements The test in Mitchill v. Lath In form a collateral agreement Cant contradict the written agreement One that would not ordinarily be embodied in the writing Andrews: s fail no. 3 and maybe no. 2 And why is that? 35 Slide 36 Collateral Agreements Would the ice house covenant naturally be found in the land sale contract? 36 Chief Judge Irving Lehman 36 Slide 37 Collateral Agreements Just how broad is the exception to the parol evidence rule? 37 Slide 38 Masterson v. Sine 38 Chief Justice Roger Traynor Jones v. Ahmanson Escola v. Coca-Cola Pacific Gas infra Perez v. Sharp Slide 39 Masterson v. Sine 39 Chief Justice Roger Traynor Justice Louis H. Burke Slide 40 Masterson What was the contract? 40 Slide 41 Masterson DallasMedora 41 Sale Option to repurchase Slide 42 Masterson DallasMedora What was the oral modification? 42 Sale Option to repurchase Slide 43 Masterson What was the oral modification? Dallas reserves an option to repurchase which does not convey to his assigns (i.e., trustee in bankruptcy) 43 Slide 44 Masterson What happens if an agreement is fully integrated per Traynor? 44 Slide 45 Masterson What happens if an agreement is fully integrated per Traynor? Parol evidence cant be admitted to add to or vary terms 45 Slide 46 Masterson How to tell if a writing is completely or partially integrated per Traynor? 46 Slide 47 Masterson How to tell if a writing is completely or partially integrated per Traynor? Any such collateral agreement must itself be examined? 47 Slide 48 Masterson How to tell if a writing is completely or partially integrated per Traynor? So can a court ever restrict itself to the writing? 48 Slide 49 Masterson What was the oral modification? How to tell if a writing is completely or partially integrated per Traynor? The conception of a writing as wholly and intrinsically self-determinative is impossible??? 49 Slide 50 Masterson Different standards for admitting oral statements: 552 Admit if the agreement would naturally be made as a separate agreement: McCormick Admit unless the terms would certainly have been included in the agreement: UCC 2-202 50 Slide 51 Masterson What about the oral evidence in this case? Admit if the agreement would naturally be made as a separate agreement: McCormick Admit unless the terms would certainly have been included in the agreement: UCC 2-202 51 Slide 52 Masterson What does it means to say that the Parol Evidence Rule is a rule of substantive law and not of evidence? P. 554 52 Slide 53 Masterson Are Burkes charges correct? The change contradicts a term which would ordinarily be supplied by operation of law. 53 Slide 54 How does the Restatement handle this? Which way does the Restatement come down? Traynor or Burke? Cf. 210(3) comment 54 Slide 55 How does the Restatement handle this? Which way does the Restatement come down? Traynor or Burke? Cf. 214 55 Slide 56 How does the Restatement handle this? Which way does the Restatement come down? Traynor or Burke? Cf. 215 56 Slide 57 How does the Restatement handle this? Which way does the Restatement come down? Traynor or Burrke? Cf. 216 Terms omitted naturally: Illustration 7 57 Slide 58 How does UCC 2-202 handle this? The writing may be explained or supplemented with consistent additional terms unless the writing was intended as complete and exclusive 58 Slide 59 How does UCC 2-202 handle this? Comment 3: Admit oral evidence unless it would certainly have been included in the writing? 59 Slide 60 How does UCC 2-202 handle this? What happened in Hunt Foods 557 60 Slide 61 How does UCC 2-202 handle this? What happened in Hunt Foods 557 George Doniler 61 Eastern Can 73% Hunt Foods Option to purchase stock Slide 62 How does UCC 2-202 handle this? Hunt Foods What was the allegedly omitted term? 62 Slide 63 How does UCC 2-202 handle this? Hunt Foods What was the allegedly omitted term? Did Hunt admit it had conceded the oral term? And why might it have not wanted to do so? 63 Slide 64 How does UCC 2-202 handle this? Hunt Foods What was the allegedly omitted term? It is not sufficient that the existence of the [oral] condition is implausible. It must be impossible. 64 Slide 65 How does UCC 2-202 handle this? Hunt Foods Were these sophisticated parties? 65 Slide 66 66 George Mason School of Law Contracts II Terms F.H. Buckley fbuckley@gmu.edu Slide 67 Next day Up to Scott 644 (Note that I will add Scott 644-59 on modification and waiver) 67 Slide 68 Masterson v. Sine 68 Chief Justice Roger Traynor Justice Louis H. Burke Slide 69 Must one always look to parol evidence? 69 Chief Justice Roger Traynor Justice Louis H. Burke Slide 70 How does UCC 2-202 handle this? Hunt Foods It is not sufficient that the existence of the [oral] condition is implausible. It must be impossible. 70 Slide 71 How does UCC 2-202 handle this? Snyder 560 What was the alleged omitted term? 71 Twin Lakes Garden Apartments Beltsville MD Slide 72 How does UCC 2-202 handle this? Snyder Is a cancellation clause inconsistent with the written contract? Why might Greenbaum have wanted to exclude unilateral exit rights? 72 Slide 73 How does UCC 2-202 handle this? Snyder Is a cancellation clause inconsistent with the written contract? Why was the Hunt Foods reasoning rejected? 73 Slide 74 Can one bargain around this? Traynor at 551: The instrument itself may help resolve the issue 74 Slide 75 Merger Clauses: UAW at 562 75 Doral Resort and Country Club, Miami Slide 76 Merger Clauses: UAW What did the contract say about cancellation rights? And how was the merger clause phrased? 76 Slide 77 Merger Clauses: UAW What did the contract say about cancellation rights? And how was the merger clause phrased? What was the alleged omitted term? 77 Slide 78 Merger Clauses: UAW You tellin me I should stay at a scab hotel!!! Concerned Union Executive Nix 78 Slide 79 Merger Clauses: UAW Roushs evidence 79 Slide 80 Merger Clauses: UAW Markman: Can the parties bargain around the threshold question of whether a contract is completely integrated with a merger clause? 80 Slide 81 Merger Clauses: UAW Markman: Can the parties bargain around the threshold question of whether a contract is completely integrated with a merger clause? Otherwise, whats the point of a merger clause? The specter of super merger clauses 81 Slide 82 Merger Clauses: UAW Markman: Can the parties bargain around the threshold question of whether a contract is completely integrated with a merger clause? What was the source of the unfairness to the successor corporation? 82 Slide 83 Merger Clauses: UAW Can you think of something the UAW could have done to satisfy its concerns? 83 Slide 84 Merger Clauses: UAW Can you think of something the UAW could have done to satisfy its concerns? Markman: The Parol Evidence Rule gives the parties the incentive to cure the problem in the express contract 84 Slide 85 Merger Clauses: UAW Dueling quotes from Corbin Pp. 565, 566, 571, 572, 573 85 Slide 86 Merger Clauses: UAW What was the allegation of fraud? 86 Slide 87 Merger Clauses: UAW What was the allegation of fraud? Did Carol Management falsely represent that the union clause was in the contract? Or that there was no merger clause? 87 Slide 88 Merger Clauses: UAW What was the allegation of fraud? Did Carol Management falsely represent that the union clause was in the contract? Or that there was no merger clause? Keeping mum about plans for sale of the hotel? 88 Slide 89 Merger Clauses: UAW What was the allegation of fraud? Did Carol Management falsely represent that the union clause was in the contract? Or that there was no merger clause? Keeping mum about plans for sale of the hotel? Was there an assertion that CMC or Roush knew that the new owners would fire all the staff. Did she know she was about to be fired? 89 Slide 90 Merger Clauses: UAW Recall Danann on merger clauses and fraud at 418 Negatived reliance on an representation 90 Slide 91 Successor Liability A contracts with noted artist B to paint a picture for $10,000. B delivers the picture, but is not paid. A sells the picture to C, without telling him that B has not been paid. Can B sue C for the purchase price? 91 Slide 92 Successor Liability A contracts with noted artist B to paint a picture for $10,000. B delivers the picture, but is not paid. A sells the picture to C, without telling him that B has not been paid. Can B sue C for the purchase price? UCC 2-403(1) A purchaser of goods acquires all title which his transferor had. 92 Slide 93 Successor Liability A contracts with noted artist B to paint a picture for $10,000. B delivers the picture, but is not paid. A sells the picture to C, without telling him that B has not been paid. Can B sue C for the purchase price? So did A acquire title from B? 93 Slide 94 Successor Liability A contracts with noted artist B to paint a picture for $10,000. B delivers the picture, but is not paid. A sells the picture to C, without telling him that B has not been paid. Can B sue C for the purchase price? UCC 2-401(2) 94 Slide 95 Successor Liability A Corp. merges with B Corp. The new corporation is called B Corp. C had a claim against A Corp. Can C bring this claim against B Corp.? 95 Slide 96 Successor Liability A Corp. sells all its assets to B Corp. C had a claim against A Corp. Can C bring this claim against B Corp.? 96 Slide 97 Successor Liability A Corp. sells all its assets to B Corp. C had a claim against A Corp. Can C bring this claim against B Corp.? The De Facto Merger Doctrine 97 Slide 98 Successor Liability A Corp. sells all its assets to B Corp. C had a claim against A Corp. Can C bring this claim against B Corp.? The De Facto Merger Doctrine Suppose you are counsel for B Corp. How do you react to the prospect of such liability before the asset sale? 98 Slide 99 UAW On Holbrooks analysis, what does a merger clause do? 99 Slide 100 UAW On Holbrooks analysis, what does a merger clause do? What sense do you make of restatement 216, cmt e 100 Slide 101 UAW Does a merger clause always work? Why not in Seibel at 577 101 Slide 102 UAW How would Markman have decided Hachmeister at p. 572? 102 Slide 103 UCC 2-316(1) What if anything does this do to merger clauses? 103 Slide 104 104 George Mason School of Law Contracts II Interpretation F.H. Buckley fbuckley@gmu.edu