George Mason School of Law Contracts II Terms

George Mason School of Law Contracts II Terms © F. H. Buckley Not for sharing fbuckley@gmu. edu 1

So now we have an enforceable contract But what is its content? 2

Identifying the Terms and Interpreting them o Identifying: what are the terms o Interpreting: what do they mean? 3

What happens where there is a writing? o First question: Is this a binding contract? 4

What happens where there is a writing? o Unsigned terms n Birmingham TV v. Waterworks at 431 5

The effect of a signature o Fraud in the factum? Curtis v. Curtis at 437 Justin Bieber signs an autograph 6

Identifying the terms o So assume we have a contract—but what are its terms? 7

The Parol Evidence Rule o Do we look outside the written contract? n n 8 Oral statements Course of dealings Trade customs Implied terms

The traditional Parol Evidence Rule o Burke at 549 in Masterson o Parol evidence is not admitted to “add to, vary or contradict” the writing 9

The traditional Parol Evidence Rule o Burke at 549 in Masterson o Parol evidence is not admitted to “add to, vary or contradict” the writing o The “four corners” rule: a presumption of full integration that excludes oral and other evidence 10

How would the Restatement change this o Completely integrated agreements o Partially integrated agreements o Non-integrated agreements 11

How would the Restatement change this o Completely integrated agreements: n Four corners rule: can’t add to o Partially integrated agreements n Can add to but can’t contradict o Non-integrated agreements n Anything goes 12

Non-integrated agreements o Is the agreement integrated or nonintegrated? n § 209(1) An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement. n Otherwise parol evidence admitted 13

Complete Integration o Restatement § 210(1) A completely integrated agreement is an integrated agreement adopted by the parties as a complete and exclusive statement of the terms of the agreement. 14

Complete Integration o Restatement § 210(1) A completely integrated agreement is an integrated agreement adopted by the parties as a complete and exclusive statement of the terms of the agreement. o So no parol evidence of any kind: o Can’t add to, vary or contradict 15

Complete Integration: Can’t “Add to” o Restatement § 213(2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope. o I. e. , can’t “add to, vary or contradict” 16

Integrated Agreements o Is this an integrated agreement? n § 209(3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other evidence that the writing did not constitute a final expression. 17

Integrated Agreements o Is this an integrated agreement? n § 209(3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other evidence that the writing did not constitute a final expression. o Does this always permit oral evidence? 18

Partial Integration o Restatement § 210 (2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is o (a) agreed to for separate consideration, or o (b) such a term as in the circumstances might naturally be omitted from the writing. 19

Partial Integration o Restatement § 210 (2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is o (a) agreed to for separate consideration, or o (b) such a term as in the circumstances might naturally be omitted from the writing. o So oral evidence can “add to” the terms 20

Partial Integration: Can’t contradict o Whether completely or partially integrated: n § 215 Except as stated in the preceding Section, where there is a binding agreement, either completely or partially integrated, evidence of prior or contemporaneous agreements or negotiations is not admissible in evidence to contradict a term of the writing. 21

Partial Integration: Can’t contradict o Restatement § 213(1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them. n I. e. , can’t “contradict” a completely or partially integrated agreement 22

Partial Integration: Can “Add to” o Restatement § 216(1) Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated. 23

Can we look behind a signed written contract for the terms of the contract? o So the traditional Parol Evidence Rule survives for completely integrated agreements but only in part (can’t contradict) for partly integrated agreements 24

Parol Evidence: Restatement §§ 209 ff. o Completely integrated agreements: n Four corners rule: can’t add to o Partially integrated agreements n Can’t contradict o Non-integrated agreements n Anything goes 25

Limits to the Parol Evidence Rule o A agrees to sell his house to B in a signed agreement on Feb. 20. o On the same day A sells a painting to B for $400 in an oral agreement. o Can the oral agreement be enforced? 26

Collateral Contracts o 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? o “Two entirely distinct contracts … may be made at the same time, and will be distinct legally. ” Williston at 543 27

Collateral Contracts o Restatement § 213(2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope. 28

Collateral Agreements o The test in Mitchill v. Lath 542 Ice House 29

Alexandria, Payne and Commerce Street 30

Collateral Agreements o How is this like my example of the painting? 31

Collateral Agreements o What is the test of a collateral agreement? 32

Collateral Agreements o The test in Mitchill v. Lath n In form a collateral agreement 33

Collateral Agreements o The test in Mitchill v. Lath n In form a collateral agreement n Can’t contradict the written agreement 34

Collateral Agreements o The test in Mitchill v. Lath n In form a collateral agreement n Can’t contradict the written agreement n The collateral agreement would not ordinarily be embodied in the main agreement 35

Collateral Agreements o The test in Mitchill v. Lath n In form a collateral agreement n Can’t contradict the written agreement n One that would not ordinarily be embodied in the writing o Andrews: Πs fail no. 3 and maybe no. 2 o And why is that? 36

Collateral Agreements o The collateral agreement would not ordinarily be embodied in the main agreement o Restatement § 213(2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope. 37

Collateral Agreements Restatement § 216(2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is (a) agreed to for separate consideration, or (b) such a term as in the circumstances might naturally be omitted from the writing. 38

Collateral Agreements n Would the ice house covenant ordinarily or naturally be found in the land sale contract? Judge William Andrews 39 Chief Judge Irving Lehman

Collateral Agreements n What about a parol warranty on a sale, per Andrews? 40

Is this an Integrated Agreement? o Restatement § 209(3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other evidence that the writing did not constitute a final expression. 41

And even if it is Integrated? o Restatement § 209(3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other evidence that the writing did not constitute a final expression. 42

Masterson v. Sine 546 Escola v. Coca-Cola Jones v. Ahmanson Pacific Gas infra Chief Justice Roger Traynor 43

Masterson v. Sine Chief Justice Roger Traynor 44 Justice Louis H. Burke

Masterson o What was the contract? 45

Masterson Sale o Dallas Medora Option to repurchase 46

Masterson Sale o Dallas Medora Option to repurchase o What was the oral modification? 47

Masterson o What was the oral modification? n Dallas reserves an option to repurchase which does not convey to his assigns (i. e. , trustee in bankruptcy) 48

Masterson o What happens if an agreement is fully integrated per Traynor? 49

Masterson o What happens if an agreement is fully integrated per Traynor? n Parol evidence can’t be admitted to add to or vary terms 50

Masterson o How to tell if a writing is completely or partially integrated per Traynor? 51

Masterson o How to tell if a writing is completely or partially integrated per Traynor? o “Any such collateral agreement must itself be examined…”? 52

Masterson o How to tell if a writing is completely or partially integrated per Traynor? o So can a court ever restrict itself to the writing? o Or was this about the absence of a merger clause? Or not? 53

Masterson o What was the oral modification? n How to tell if a writing is completely or partially integrated per Traynor? o “The conception of a writing as wholly and intrinsically selfdeterminative… is impossible”: Wigmore 54

Masterson o What does it means to say that the Parol Evidence Rule is a rule of substantive law and not of evidence? P. 549 55

Masterson o Are Burke’s charges correct? n The change contradicts a term which would ordinarily be supplied by operation of law. 56

Masterson o Are Burke’s charges correct? n The change contradicts a term which would ordinarily be supplied by operation of law. n A fraudulent conveyance? 57

How does the Restatement handle this? o Which way does the Restatement come down? Traynor or Burke? 58

How does the Restatement handle this? o § 214. Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish o (a) that the writing is or is not an integrated agreement; o (b) that the integrated agreement, if any, is completely or partially integrated; o (c) the meaning of the writing, whether or not integrated; o (d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause; o (e) ground for granting or denying rescission, reformation, specific performance. . . 59

How does the Restatement handle this? o Which way does the Restatement come down? Traynor or Burke? n Cf. § 210(3) comment: “a writing cannot prove its own completeness” n If not, can one always introduce parol evidence? 60

How does UCC 2 -202 handle this? o Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented (a) by course of dealing or usage of trade or by course of performance; and (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement. 61

How does UCC 2 -202 handle this? o Comment 3: Admit oral evidence unless it would “certainly” have been included in the writing 62

Compare to the common law standard o Admit parol evidence if the terms would “naturally be made as a separate agreement”: Restatement 216 n UCC 2 -202 is more ready to admit parol evidence: Admit unless the terms would “certainly have been included in the agreement” 63

What can be admitted as parol evidence Terms that would not certainly be included in the agreement: UCC Terms naturally made in a separate agreement: Restatement 64

How does UCC 2 -202 handle this? o What happened in Hunt Foods 562 65

How does UCC 2 -202 handle this? o What happened in Hunt Foods 562 o How was this an Article 2 transaction? 66

How does UCC 2 -202 handle this? o What happened in Hunt Foods 557 Asset purchase agreement George Doniler 73% Eastern Can 67 Hunt Foods

How does UCC 2 -202 handle this? o What happened in Hunt Foods 562 George Doniler 73% Eastern Can 68 Option to purchase stock Hunt Foods

How does UCC 2 -202 handle this? o Hunt Foods n What was the allegedly omitted term? 69

How does UCC 2 -202 handle this? o Hunt Foods n What was the allegedly omitted term? o Option to be exercised only if Doliners shopped around 70

How does UCC 2 -202 handle this? o Hunt Foods n What was the allegedly omitted term? o Did Hunt admit it had conceded the oral term? n And why might Hunt have rejected this? 71

How does UCC 2 -202 handle this? o Hunt Foods n How did the court interpret UCC 2 -202? 72

How does UCC 2 -202 handle this? o Hunt Foods n What was the allegedly omitted term? o “It is not sufficient that the existence of the [oral] condition is implausible. It must be impossible. ” 73

How does UCC 2 -202 handle this? o Hunt Foods n Were these sophisticated parties? 74

Can the impossibility standard be met? o Snyder 565 n What was the alleged omitted term? 75 Twin Lakes Garden Apartments Beltsville MD

Can the impossibility standard be met? o Snyder n Is a cancellation clause inconsistent with the written contract? o Why might Greenbaum have wanted to exclude unilateral exit rights? 76

Can the impossibility standard be met? o Snyder n Is a cancellation clause inconsistent with the written contract? o Why was the Hunt Foods reasoning rejected? 77

Can the impossibility standard be met? o Snyder n Is a cancellation clause inconsistent with the written contract? o The court’s standard: “an absence of reasonable harmony” 78

Can one bargain around this? o Traynor at 547: n “The instrument itself may help resolve the issue” 79

Can one bargain around this? o Traynor at 547: n “The instrument itself may help resolve the issue” n But “Any such [oral] collateral agreement itself must be examined … to determine whether the parties intended [it] to be included” 80

Can one bargain around this? o Traynor at 547: n Are we running into a rule of paternalism here? 81

Can one bargain around this? o Traynor at 547: n Should the parties be permitted to bargain back into the parol evidence rule? 82

Can one bargain around this? o Traynor at 551: n Should the parties be permitted to bargain back into the parol evidence rule? n And just how would they do this? 83

Can one bargain around this? o Traynor at 551: n Should the parties be permitted to bargain back into the parol evidence rule? n And just how would they do this? o Cf Eisenberg and Miller at 566 84

Can one bargain around this? o Traynor at 551: n Should the parties be permitted to bargain back into the parol evidence rule? n And just how would they do this? o Merger Clauses? 85

Merger Clauses: UAW at 553 Doral Resort and Country Club, Miami 86

Merger Clauses: UAW o How was the merger clause phrased? 87

Merger Clauses: UAW o How was the merger clause phrased? o What was the alleged omitted term? 88

Merger Clauses: UAW o Roush’s evidence 89

Merger Clauses: UAW o Markman: Can the parties bargain around the “threshold question” of whether a contract is completely integrated with a merger clause? 90

Merger Clauses: UAW o Markman: Can the parties bargain around the “threshold question” of whether a contract is completely integrated with a merger clause? n What was the source of the “unfairness” to the successor corporation? 91

Merger Clauses: UAW o Can you think of something the UAW could have done to satisfy its concerns? 92

Merger Clauses: UAW o Can you think of something the UAW could have done to satisfy its concerns? n Markman: The Parol Evidence Rule gives the parties the incentive to cure the problem in the express contract 93

Merger Clauses: UAW o What was the allegation of fraud? 94

Merger Clauses: UAW o What was the allegation of fraud? n Did Carol Management falsely represent that the union clause was in the contract? n Or that there was no merger clause? 95

UAW o On Holbrook’s analysis, what does a merger clause do? 96

UAW o On Holbrook’s analysis, what does a merger clause do? o Cf. Restatement § 216, cmt e: Merger clauses are not controlling 97

Merger Clauses: UAW o Recall Danann on merger clauses and fraud at 428 n A Danann clause negatives reliance on an representation 98

UAW o Does a merger clause always work? n Why not in Seibel at 561 99

UAW o How would Markman have decided Hachmeister at p. 557? 100

So when can parol evidence be introduced? 101

So when can parol evidence be introduced? o Always, it the PER is simply a rule of evidence n Traynor 102

So when can parol evidence be introduced? o When the added term would certainly not have been included in the writing: UCC 2 -202 103

So when can parol evidence be introduced? o When the added term would not naturally have been included in the writing: Restatement 216 104

So when can parol evidence be introduced? o When the agreement is tainted by fraud as to its execution or to the presence of a merger clause n Unless there is a Danann clause? n Restatement 214(d): Illegality, fraud, duress, mistake 105