cards law

Pre-Contractual Statements BEFORE Formation

Parole Evidence Rule

Parole Evidence Rule is looked at

Pre-Contractual Statements BEFORE Formation, 

Step 1 of Parole Evidence Rule:

Is there writing?

If no writing —→ we stop here

Step 2:

Is it fully integrated/partially integrated or not integrated?

How to Determine if Integration:

Merger Clause:

Four Corners Approach:  .. 

The more comprehensive, the more detailed —>  fully integrated

:

Determining Integration: Merger Clause

Four Corners Approach: Determining Integration

Look at four corners of contract, looking at the terms. No extrinsic evidence looked at. Just look at the contract

EE Approach/Restatement Approach:

Look at the writing AND outside evidence and ask:

Would two parties usually leave this OUT of the document? If yes —→ partially integrated

If it’s fully integrated:

No EE comes in EXCEPT if ambiguous on face

Example: If you read the contract and it is not clear what the term says, THEN, we bring extrinsic evidence.

If partially integrated:

EE can come in if it does NOT contradict the writing.I

When is the contract unintegrated?

If it never becomes finalized. Then, everything can come in. BUT only if it NEVER was finalized.

How to Bypass Parole Evidence Rule?

Collateral Agreement Doctrine

CAN

Collateral Agreement Doctrine

Asks:

SCN

Must be Side, Can’t Contradict What’s In the Contract, Not Naturally Expected to Be Inside Writing

It can’t be a side deal.

It can’t contradict what’s in the contract.

It must not be naturally expected to be in the writing.

1. It's a side deal, not the main deal. The oil changes are separate from buying the car itself. You're not rewriting the purchase price or the car model — it's just a little bonus agreement floating alongside the main contract. ✅

2. It doesn't contradict the writing. If the written contract said "no additional services included," the oral promise would directly clash with that — and it dies. But if the contract is silent on services, there's no contradiction. ✅

3. You wouldn't normally put this in the main contract. A formal car purchase contract talks about price, financing, title, warranties. Free oil changes? That's a casual, side-deal kind of thing — not something parties would typically memorialize in the main document. ✅

Interpretation

Plain Meaning Rule

Restatement Approach

Plain Meaning Rule

No EE to CREATE ambiguity — the contract must appear ambiguous on its own face first. Then EE may resolve it.

Interpretation: CA Approach

Court may PROVISIONALLY consider EE first to check if language is 'reasonably susceptible' to another meaning.

If language is found to not make sense to be in the contract —→ EE excluded

The judge takes a sneak peek at the texts. Then they look at the word "banana." Is "banana" reasonably susceptible to meaning a MacBook? No. That is ridiculous; the language is entirely unambiguous. The judge excludes the text messages, and you are stuck buying a very expensive piece of fruit.

Purpose of Parole Evidence Rule

Prevent Fraud, Protect Written Agreements

Under the UCC, Good Faith:

1. Honesty in fact

   1. Did the party (subjective) actually intend to be honest in their dealings?

IF MERCHANT BOTH 1 ABOVE and 2 BELOW:

2. The observance of reasonable commercial standards of fair dealing

1. Would a reasonable merchant in that industry consider this fair?

1. Duty of good faith cannot be written away but under UCC parties can define what is good faith.

   1. (i.e, Good faith means responding to requests within 48 hours)

Are you allowed to charge more for a good? Will this violate good faith?

No, it will not violate good faith as long as you don’t game it.

Trigger: If you see someone taking advantage of someone forgetting something ask:

• Did Party A know Party B forgot the clause?

• Did Party A deliberately stay quiet and structure the deal specifically to spring the trap?

• If Yes → Bad Faith

What does best efforts mean?

You must try. If you desperately cut resources to raise profit for yourself, this is not best effort.

Good faith v. Best Effort

Good faith means don’t be dishonest.

Best effort means actually try hard.

Condition

An event that must happen before your duty is triggered. (i.e I’ll buy your house if I get a loan)  The loan is a condition on your purchase.

Your duty will not arise if the loan does not happen.

Condition Trigger

●      'if,' 'on condition that,' 'provided that,' 'unless,' 'until'

What is expected when you have a condition?

You are expected to try to meet the condition (i.e, try to obtain the loan)

(Trigger, when buyer is avoiding condition)

When is a condition excused?

Condition may be excused if it is a widely disproportionate result

Imagine a contractor spends 6 months building a $500,000 house. The contract says, "Owner pays only if the roof is finished by Tuesday at 5:00 PM." The contractor finishes the roof on Tuesday at 5:15 PM. Technically, the condition failed. But letting the owner keep a free $500,000 house over a 15-minute delay is a disproportionate forfeiture. The court will excuse the 15-minute condition, force the owner to pay, and maybe deduct a few dollars for the delay.

Who can waive a condition?

The person who is benefiting/protecting from it

In the house example, I can waive my condition to obtain a loan.

Express Waiver

Agreeing to waive condition orally or in writing:

“I tell someone, don’t worry about that condition. I’ll still pay.

Implied Waiver

party’s actions or conduct clearly indicate they are voluntarily abandoning a known contractual right. You waive the condition and cannot later come and help yourself to it.

When can you retract the waiver that you made?

1. Deadline hasn’t passed

2. Condition is still in other person’s control

3. Other party hasn’t detrimentally relied

Promise Only

I promise to pay by Friday for an HVAC

What happens if you made a promise?

The other party still has to perform but can sue for delay.

Promise and Condition

HVAC company promises to deliver HVAC but only if payment is received by Friday 

Result: If payment is not received by Friday, the HVAC company does not have to deliver HVAC AND can sue me for not paying.

OR

I promise to pay by Friday for an HVAC if it is delivered to me on Friday. 

Result: If it’s not delivered on Friday, I don’t have to pay AND can sue.

Implied-in-fact condition

You hire a painter to paint your bedroom. The contract doesn't explicitly say "you must unlock the front door," but letting them inside is an implied-in-fact condition. If you refuse to let them in, they are not obligated to paint.

Constructive Condition

Court will add if it’s fair

Promissory Condition

• Step A: Identify the "Event" (e.g., Paying $500).

• Step B: Did a party commit themselves to making that event happen?

  • Yes? It’s a Promise.

  • No (it's outside their control, like "if it rains")? It’s a Pure Condition.

• Step C: Must that event happen before the other party's duty is triggered?

  • Yes? It is a Condition.

Satisfaction Clauses

Personal Art/Painting: Subjective standard —> Was this person actually satisfied?

In Commercial Setting —> OBJECTIVE Standard —> Would reasonable person be dissatisfied?

Divisible Contract

John (buyer) contracts with Rice Mills (seller) for:

• January rice → $10,000

• February rice → $10,000

• March rice → $10,000

Indivisible Contract

Entire contract for $500,000

Performance

Common Law: Substantial Performance

UCC: Perfect Tender Rule

Substantial Performance

If contract is substantially performed (equivalent pipes), then the other person must pay.  may get credit for difference in value (value of pipes)

What to ask for substantial performance?

Why didn’t they perform fully? ANalyze: 

1. Intentional or a mistake?

   1.  If it’s a mistake the other party must pay and can subtract DIV when they pay. 

   2. If it’s intentional, other person can withhold payment.

2. Core purpose of contract met?

3. Is fixing the problem disproportionately expensive?

How to get around substantial performance for pipes case?

To get around the pipe case, in the contract it should have said the Pipes MUST be this brand.

Article 2 of UCC ONLY: Perfect Tender Rule

Perfect Tender - When does it apply?

Always unless they contract out of it

Step 1: Perfect Tender Rule

1. Seller tenders goods

Step 2: Perfect Tender Rule

After seller tends the goods, Buyer CAN within a reasonable time:

1. Accept goods and PAY for goods OR

2. Inspect the goods —→ If buyer finds an issue (no matter how small) —→ Buyer can reject ALL/or some of the goods

But what happens if buyer does nothing?

Buyer HAS Accepted the Goods and cannot back out even if there is an issue UNLESS he can revoke his acceptance.

How can the buyer revoke his acceptance?

The Non-Conformity MUST:

1. Substantially impaired the value of the goods (1 blue marker with 999 dry erase markets = does not work

2. Valid Reason for the Initial Acceptance WHICH IS:

   1. Buyer didn’t discover the Defect Right Away because they reasonably couldn’t have in the time

   2. OR they reasonably assumed the seller would fix it and the seller didn’t fix it

When is the seller allowed to cure non conformity?

Seller IS ALLOWED TO CURE non-conformity if:

1. There is time in the contract/contract hasn’t expired 

   1. (if seller gives wrong, goods on March 10th, but deadline was March 15th, then seller can cure it by resolving the issue and THEN the buyer must accept the goods because not it is perfect tender)

2. If small non conformity:

   1. If seller has reasonable ground (prior contract) to believe that the buyer will accept a replacement for non conformity → Buyer MUST give seller to cure non conformity and then the BUYER has to Acept

Exception to When Buyer Cannot Reject The Goods

If seller makes an honest mistake and fixes it, the BUYER must accept goods

When do you pay someone?

When they performedMate

How to discharge someone from paying?

Material Breach

Material Breach

If someone breaches, the other person no longer has to complete their obligations,

Example: Contractor does not build roof at all. The buyer doesn’t have to pay.

Allow Breaching Party to Cure Breach

If someone breaches the contract, the innocent person must be allow the breaching party time to cure the breach.

When do we allow the innocent party not allow the breaching party to cure the breach?

Less time to cure for goods fluctuating rapidly

Breaching party acts in bad faith

Breaching party says they literally will not pay

What happens if the beach is not cured by the breaching party?

The contract is terminated and the innocent party can sue

What happens if the beach is cured by the breaching party?

The contract continues

Once a breaching party breaches, the innocent party has to pay for

Unjust enrichment they received

Britton agreed to work one year for $120. He quit after 9.5 months. Turner paid nothing because the contract wasn't complete. Holding: A breaching party CAN still recover the reasonable value of work done, but the innocent party gets to SUBTRACT any damages caused by the breach. Rule: Prevents unjust enrichment — Turner 'consumed' 9.5 months of labor he cannot return. Formula: (Reasonable Value of Work) – (Damages Caused by Breach) = Final Recovery

REPUDIATION

when one party, through words or actions, clearly and unequivocally communicates an inability or unwillingness to perform their contractual obligations before they are due

Anticipatory Repudiation

MUST BE INTENTIONAL BY ME

a statement which makes it clear that a party will not perform

After OUR Contract, I tell contractor, I am not going to pay for the HVAC,

What is not considered an Anticipatory Repudiation?

Something minor (I’ll pay tomorrow instead)

What can the innocent party do once an anticipatory repudiation has taken place?

1. Cancel/discharge the contract as over and SUE IMMEDIATELY

   1. Contractor no longer has to perform under the contract and can SUE immediately.

2. Wait and See, Then Sue After Due Date (Must MITIGATE)

   1. Contractor can wait and see if I will pay anyway if I change my mind. If I don’t then he can sue.

   2. If he does this, he must mitigate his losses ONCE HE RECEIVES NOTICE.

When can a breaching party retract his repudiation?

1. Victim/innocent party has not relied on it

   1. Contractor hasn’t given my HVAC to someone else because I told him I don’t need it anymore

2. Victim/innocent party has not accepted the repudiation.

   1. Contractor has not acknowledged that I cancelled the contract

If a breaching party repatriates while contract in progress is occurring (construction)?

1. Innocent party can stop and find a new project

   1. Contractor can stop and find a new project 

2. Innocent party can sue breaching party for breach.

If a breaching party repatriates while contract completed (construction finished)?

Innocent party must WAIT until due date to ensure breaching party doesn’t pay. ONLY following this, Innocent party can sue.

Express Warranty Governed by:

UCC

When is an express warranty triggered?

1. ANY AFFIRMATION OF FACT (NOT OPINION)

   1. 800 pages —> you buy because it’s 800 pages and if you get the book, it’s 20 pages

2. Product description

3. Sample of product given to you (basis of the bargain)

What is NOT an express warranty?

Statement of Opinion (NOT AN Affirmation Fact)

   

Example: I think this is a good/high quality dry erase market 

Can you disclaim an express warranty?

No.

Warranty Analysis:

1. Is party a merchant?

   • If YES, 2-314 Implied Warranty of Merchantability applies 2-315 applies if elements are MET.

   • If NO, ONLY 2-315 applies if elements are met(Fitness)

2-314 Implied Warranty of Merchantability Analysis

Must be Merchant —→ must regularly sell dry erase markers. (if that person sells a car —→ not a merchant)

The Warranty: Goods MUST be fit for their ordinary use

Dry erase marker = can draw on a white board

2-314 How to Disclaim This Warranty?

1. Writing

   • MUST be CLEAR and Conspicuous

   • MUST use word Merchantability

   • Below a signature line = Qualifies to disclaim

2. Orally

   1. You must say the word Merchantability.

Automatic Exception to Implied Warranty of Merchantability Other Than Disclaimer Above

Pre-Contract Buyer Inspection

There is no warranty for defects the buyer COULD HAVE found by reasonably inspecting. (doesn't matter if buyer inspected it) AS LONG AS:

1. Seller gave opportunity to inspect the goods

2. Buyer refused to inspect OR Inspected the Goods

What warranty applies to EVERYONE (even if you are not a merchant)?

UCC: Implied Warranty of Fitness for a Particular Purpose 2-315

UCC: Implied Warranty of Fitness for a Particular Purpose 2-315

1. Applies to anyone even if NON merchant

It applies when:

1. The Seller Has Reason To Know That A Buyer Has a Particular Use for the Good

2. The Buyer is Relying on the Seller’s Skill

UCC: Implied Warranty of Fitness for a Particular Purpose 2-315: How to disclaim?

In writing ONLY (not oral) and must be conspicuous

What is the remedy for breach of warranty/

Value of goods as warranted MINUS value of goods accepted = REMEDY

A contractor buys a $5,000 industrial heater warranted to heat 1,000 sq ft. It only heats 400 sq ft, making its actual market value $2,000.

Remedy: ($5,000 (Value of goods) - $2,000 value of goods accepted) = $3,000 (REMEDY)

Under UCC, what are BUYER remedies if a SELLER breaches?

BUYER REMDIES:

1. Can Cancel Deal

2. Go Buy it Elsewhere

3. Sue for Damages

4. Some Combination

UCC: What happens if buyer buys it elsewhere?

Cover Price (price you paid elsewhere/replacement)  - Contract Price (what you were supposed to pay) + Extra Damages (Uber Cost to further location)  - Expenses Saved (paperwork, you didn’t have to do)

What is a limitation to cover?

Cover must be reasonable and done without unreasonable day

UCC: What happens if buyer does not buy it elsewhere?

MARKET Price is used instead.

Formula: Market Price (going rate for those goods on the day you breached) - Contract Price + Incidental/Consequentional Damages - Expenses Saved =

Under UCC, what are SELLER remedies if a BUYER breaches?

If seller sold the goods to a different buyer:

Contract price - Resale price (what new buyer paid) + Extra Costs -  Savings = Payment

If seller did NOT sell the goods to a different buyer:

Contract price - Market price + Extra Costs - Savings

Special Situation with Lost Volume Seller

Could the seller have made both sales if both buyers had performed? If yes → lost volume seller?

Unlimited Goods: Even though seller may have sold good to someone else, they have unlimited goods so they could have sold it to both people and made profit from both. So it is not fair to use above formula and say that they are covered)

If this is the case —> Lost Profit Can Be Recovered INSTEAD

Specific Performance

• Money damages must be inadequate AND

• Judicial Discretion

  • Courts don’t want to award specific performance when the person seeking specific performance wrote the contract to their favor

  
  

Does specific performance apply to personal services?

No due to slavery.

Specific Performance is less likely when:

comparable items exist on the market

If money damages are hard to calculate?

Injunction may be appropriate

Injunction may be appropriate when:

money damages are hard to speculate

Limitation on Damages:

Mitigation

Foreseeability

Certainty

Mitigation

Can’t recover losses you reasonably could have avoided

You get paid for the loss you could NOT avoid, not the loss you let grow.

Employer  —--> You only have to find a similar job for mitigation purposes. If you couldn’t have found a similar job, you are not bound to mitigate.

No DUTY to Actually Mitigate: But if you choose not to, you can't charge the other person for the part of the mess you could have easily cleaned up.

Foreseeability

Can only recover consequential damages reasonably foreseeable to the breacher at time of contracting.

Certainty

Must prove damages with reasonable certainty, otherwise they are disallowed.

UCC: Mitigation if Seller Breaches

If SELLER breaches, and the buyer could have covered (bought goods somewhere else), then any losses after that (factory losses) can not be recovered.

What happens if the seller fixes a problem immediately under UCC?

Buyer gets no damages

UCC: If Buyer Breaches Contract with Seller 

Seller Can Mitigate by:

1. May finish goods (if it makes sense)

2. Stop manufacturing

What can SELLER recover if buyer breaches and seller resell the goods to someone else?

Seller resells goods for $70 in a normal, reasonable sale.

Damages = 100 (original contract)– 70 (new resale price to someone else) = $30 loss can be recovered

What can SELLER recover if buyer breaches and the seller DOES NOT resell the goods?

If buyer breaches a $100 product, but seller can still it on the market for $60  = $40 loss

Lost Volume Sellers

Mitigation does not apply to them. They can still recover lost profit.