Contracts II (copy)

If there is a traditional K, was it breached?

When performance of a duty under a K is due, any nonperformance is a breach.

What are the party’s obligations?

PER and interpretation are used to determine the parties’ obligations.

Is there PE?

PE is anything outside of the final writing of the agreement.

What is included in PE?

Prior negotiations, letters, memos, preliminary drafts, texts, emails, conversations

Is it an additional consistent term?

An additional consistent term is one that was agreed to for separate consideration or might naturally be omitted from the writing.

What if the PE is not being used to supplement with an additional consistent term?

The level of integration of the writing doesn’t matter.

What does PER1 deal with?

Terms

What does PER2 deal with?

Context

Is the agreement integrated?

Integrated agreements require that the writing constitute a final expression of one or more terms of the agreement.

What if the agreement is not integrated?

PER does not apply.

What does PER get you?

Exclusion of evidence.

Is the agreement partially integrated?

Partially integrated means the parties intended the writing to be complete and exclusive with respect to the terms that are included in the writing.

What if the agreement is partially integrated?

PE is admissible only to supplement with an additional consistent term but cannot contradict the terms of the K.

Is the agreement completely integrated?

Completely integrated means the parties intended the writing to be complete and exclusive.

What if the agreement is completely integrated?

PE is not admissible to supplement with an additional consistent term nor to contradict the terms of the K.

Can the nonperformance be justified?

To show that a nonperformance is justified, you must have a legal justification.

What discharges a duty under a K?

Only full performance.

Is the nonperformance obvious or not obvious?

Not obvious requires that the nonperformance depends on an interpretation of the K.

Where do you go if the nonperformance is obvious?

Skip to “is it justified?”

What if there is no nonperformance?

There is no breach.

What does Party A argue with respect to integration?

The writing is completely integrated.

What does Party B argue with respect to integration?

The writing is partially integrated.

What does integration turn on?

The parties’ intent

What test does the classical approach use for integration?

The four corners test

What test does the modern approach use for integration?

The facts & circumstances test

What is the four corners test?

The court should look only at the writing itself.

What is the four corners test used for?

To determine the parties’ intent

Under the classical approach, what does a merger clause do?

It conclusively establishes that the writing is completely integrated.

Absent a merger clause, what is the classical approach’s position on integration?

A written agreement should be taken as a complete integration unless on its face it appears to be incomplete.

What is the significance of the writing under the classical approach to integration?

It gives primacy to the writing and does not want to let outside evidence in to change the writing.

What is the facts & circumstances test?

Courts look to the writing to see if:

(1) it was the product of negotiation;

(2) multiple drafts were circulated;

(3) third-party advisers were present;

(4) the writing was formal

(5) the execution of the writing was formal.

Under the modern approach, what does a merger clause do?

It is a factor to consider but does not conclusively establish complete integration.

What is the significance of the writing under the modern approach?

The writing cannot prove itself, so you must look outside to show the parties’ intent.

What are the exceptions to the PER?

(1) to explain;

(2) subsequent agreements;

(3) parol express conditions;

(4) invalidating causes;

(5) collateral agreements

Is the PE being used to explain the meaning of the K?

Such evidence is used not to contradict or vary the written instrument but to aid, uphold, and enforce it as it stands.

Is the PE regarding a collateral agreement?

Classical or Modern approach determines application.

What if the PE is regarding a collateral agreement under the classical approach?

The subject matter of the PE must be distinct from the subject matter of the writing.

What party would argue for the classical approach to the collateral agreement exception?

Party A (the party that doesn’t want the PE).

What if the PE is regarding a collateral agreement under the modern approach?

R216(2) - When an agreement is partially integrated, an additional consistent term may supplement the writing if it is (1) agreed to for separate KSN, or (2) might naturally be omitted from the writing.

What party would argue for the modern approach to the collateral agreement exception?

Party B (the party that wants the PE).

Would the additional consistent term naturally be omitted from the writing?

Courts look to whether the term would fundamentally change the bargained-for expectation or risks under the K.

What if the additional consistent term would fundamentally change the bargained-for expectation or risks under the K?

It would not naturally be omitted from the writing, and the term is excluded.

What if the additional consistent term would not fundamentally change the bargained-for expectation or risks under the K?

It might naturally be omitted from the writing, and the term is included.

What happens if you argue a PER exception successfully?

PE comes in.

Who is the only party that would ever argue an exception to the PER?

The party that wants the PE (Party B).

Is the PE related to a subsequent agreement?

The PER does not apply to oral or written agreements (or any other PE that comes into existence) after the execution of the writing.

Is the PE regarding a parol express condition?

The PER does not apply to evidence offered to show that effectiveness of the agreement was subject to an oral condition precedent.

What is the argument for the PEC exception to the PER?

Party B would argue that the PE should come in under the PEC exception to the PER.

What are the two PER supplementation scenarios?

(1) CAE

(2) PEC

When can an invalidating cause exception to the PER come up?

Anytime the facts allow

What is the invalidating cause exception?

R214(d) - Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish (d) illegality, fraud, duress, mistake, lack of KSN, or other invalidating cause.

Who would argue the invaliding cause exception?

Party B - the party who wants the PE to come in

What is Party B’s argument with respect to the invalidating cause exception?

(1) the K is unenforceable or avoidable because it is the product of [invalidating cause], and therefore,

(2) the PER doesn’t and shouldn’t apply to this writing at all,

(3) which means that the PE for the invalidating cause should come in.

How many PER scenarios are there?

Four

What are the PER scenarios?

(1) PER1: Supp/CAT/CAE

(2) PER1: Supp/CAT/PEC

(3) PER2: To Explain Context

(4) PER Invalidating Causes

What are the triggering facts for the PER?

(1) A written agreement

(2) A piece of PE

(3) One party does not want the PE (Party A)

(4) The other party wants the PE (Party B)

What is the purpose of the PER?

To determine what the parties’ obligations are.

What PER is the “to explain” exception?

PER2: Context

What restatement is the PER2 to explain exception?

214(c)

What are the steps to interpretation?

(1) Determining ambiguity.

(2) Whose meaning prevails?

Where does the PER2 To Explain exception come into the interpretation analysis?

(1) Determining Ambiguity

What is the argument under the Classical Approach to interpretation Step 1?

Party A would argue that there is no patent ambiguity.

What is patent ambiguity?

Ambiguity that must appear on the face of the writing.

What is the argument under the modern approach to interpretation Step 1?

Party B would argue that there is latent ambiguity.

What is latent ambiguity?

Ambiguity that is not obvious on the face of the writing but can be shown.

What test is used to determine ambiguity?

The reasonably susceptible test

What is the reasonably susceptible test?

Is the disputed language reasonably susceptible to more than one meaning?

What do courts look to under the classical approach to interpretation Step 1?

The K only

What do courts look to under the modern approach to interpretation Step 1?

The K + PE

What happens if there is patent ambiguity?

The PE is admitted to the trier of fact.

What happens if there is not patent ambiguity?

PE is excluded entirely.

What happens if there is latent ambiguity?

PE admitted to the trier of fact.

What happens if there is no latent ambiguity?

PE is for the judge only

What happens if the PE is admitted under the classical approach to interpretation Step 1?

It would also be admitted under the Modern Approach.

What are justifications for the PER?

• Memory is uncertain

• Perjury

• Certainty

• Ease of administration

• Efficiency

• Encourage writings

• Distrust of juries

What are some criticisms of the PER?

• People, including businesspeople, don’t put everything into writing.

• Injustice

• Complicated and inconsistent

• Parties’ intent

• Nonsensical

What does an application of the reasonably susceptible test under the classical approach look like?

(1) Look at the rest of the K to see if any other provisions in the K show whether the disputed language is or isn’t ambiguous;

(2) Understand what all of the provisions of the K mean to use those provisions to make a specific argument about why the disputed language is or isn’t ambiguous.

Whose meaning prevails?

To determine whose meaning prevails, the common law and UCC both use R201.

What is R201(1)?

If the parties attach the same meaning to the K language, that meaning controls.

What is Party A’s argument under R201(1)?

By “x,” I meant “x,” and that was the meaning we both attached to the disputed language.

What is Party B’s argument under R201(1)?

By “x,” I meant “y,” and that was the meaning we both attached to the language.

What is R201(2)?

If the parties attach different meanings to the terms of the agmt, then the “innocent party” meaning will prevail if:

(i) the other party knew or had reason to know of any different meaning attached by the innocent party, and

(ii) the innocent party didn’t know or have reason to know of any different meaning attached by the other party.

Who is the “innocent” party for purposes of R201(2)?

The party who is less at fault; who didn’t know or have reason to know the other party’s meaning

What is R201(3)?

Where the parties have the same level of knowledge, neither meaning prevails.

What is the caveat with R201(3)?

It is rarely used. Courts find resolution prior to this step in most instances.

Where neither meaning prevails, how do courts typically treat the disputed language?

As a gap in the K

If the disputed language is not material, what do courts do?

Add a term reasonable under the circumstances

If the disputed language is material but no performance has been completed yet, or the performance can be undone, what do courts do?

K is nullified

If the disputed language is material and performance cannot be undone, what do courts do?

Add a term reasonable under the circumstances

What is the objective theory to K law?

Creation of the K has nothing to do with mental state of either party but rather with their words and conduct.

What is the test under the objective theory to K law, and how is it applied?

Would a reasonable person conclude that the parties by their words & conduct intended to enter into a K?

If yes, a K is formed, even if either or both of them did not intend to be bound.

What is the objective theory to K law based on?

fairness & efficiency

What is the problem with the objective theory to K law?

When taken to an extreme, it produces ludicrous results.

What is the subjective theory to K law?

It focuses on what the parties to a K actually meant or intended when they entered into a K

What is the test under the subjective theory to K law, and how is it applied?

Was there a meeting of the minds?

If no, no K is formed.

What is the problem with the subjective theory to K law?

Taken to an extreme, a lot of Ks would not be enforced even if they existed.

Is the language of the K PE?

No, the language of the K is NOT PE

Are preliminary negotiations PE?

Yes, preliminary negotiations are PE

Is trade usage PE?

Yes, trade usage is PE

What is the rule for trade usage?

Members of a trade are bound by terms that are common in that trade.