Contract Terms, Warranties, Parol Evidence, and Modification

What generally happens when the parties fully perform their contractual duties?

The contract is discharged.

What is contractual ambiguity?

Language that is unclear or has more than one possible meaning.

How should courts read a contract when interpreting its terms?

As a whole.

What meaning do courts generally give contractual words?

Their ordinary meaning.

What interpretation do courts generally favor concerning a contract’s validity?

An interpretation that makes the contract valid and enforceable.

Against whom are contractual ambiguities generally construed?

The party who drafted the contract.

What is usage of trade?

A practice or meaning commonly recognized in a particular industry.

What is course of dealing?

The parties’ conduct in previous transactions with each other.

What is course of performance?

The parties’ conduct in performing the current contract.

What is the difference between course of dealing and course of performance?

Course of dealing concerns previous transactions; course of performance concerns the current contract.

Which generally prevails when course of dealing conflicts with usage of trade?

Course of dealing.

How can prior banana purchases affect the meaning of “container”?

If the seller consistently supplied half containers in previous transactions, “container” may mean a half container between those parties.

What are UCC gap fillers?

Rules that supply reasonable terms omitted from a sales contract.

Can courts generally supply missing terms under UCC Article 2?

Yes, but ordinarily not a missing quantity.

When must goods be delivered if the contract does not specify a delivery time?

Within a reasonable time.

What is a warranty?

A promise concerning the qualities, characteristics, or title of goods.

What can create an express warranty?

A statement of fact, description, sample, or model that becomes part of the basis of the bargain.

What does an express warranty require concerning a description or sample?

The goods must conform to that description or sample.

What does the warranty of title generally promise?

The seller has good title and the right to transfer the goods.

Is the warranty of title technically classified as an implied warranty?

No.

When does the implied warranty of merchantability arise?

When the seller is a merchant who deals in goods of the kind sold.

What does the implied warranty of merchantability principally require?

The goods must be fit for their ordinary purposes.

Why would moldy chips breach the warranty of merchantability?

They are not fit for their ordinary purpose of being eaten.

Can the implied warranty of fitness for a particular purpose arise when the seller is not a merchant?

Yes, it can arise in a sale by any seller.

What must the seller have reason to know for the warranty of fitness for a particular purpose to arise?

The buyer’s particular purpose and the buyer’s reliance on the seller’s skill or judgment to select suitable goods.

What must the buyer actually do for the warranty of fitness for a particular purpose to arise?

Rely on the seller’s skill or judgment.

Must a seller be an expert for the warranty of fitness for a particular purpose to arise?

No.

What warranty may arise when a seller recommends a car after learning that the buyer needs it to tow a four-ton boat?

The implied warranty of fitness for a particular purpose, if the buyer relies on the recommendation.

What is the main difference between merchantability and fitness for a particular purpose?

Merchantability concerns ordinary uses; fitness concerns the buyer’s particular purpose and reliance on the seller.

What is the parol evidence rule?

A rule limiting the use of prior agreements and contemporaneous oral agreements to alter an integrated written contract.

What is an integrated writing?

A writing intended as the final expression of the parties’ agreement.

What is a fully integrated writing?

A writing intended as the final and complete expression of the parties’ agreement.

What does a clause stating “This is our final and full agreement” indicate?

The parties intended the writing to be a complete integration.

What types of communications does the parol evidence rule generally restrict?

Prior oral agreements, prior written agreements, and contemporaneous oral agreements.

Can prior agreements generally contradict the terms of an integrated writing?

No.

Can prior agreements generally add terms to a fully integrated writing?

No.

Why might a buyer be unable to enforce an earlier oral promise of monthly car washing?

The promise was omitted from the fully integrated written agreement, and the parol evidence rule generally bars adding it through evidence of the earlier promise.

Does a written contract have to consist of a single document?

No.

Why may contemporaneous written terms be considered part of the contract?

The parties’ written agreement may consist of multiple documents.

Can outside evidence be admitted to explain the meaning of contractual terms?

Yes.

Can usage of trade, course of dealing, or course of performance help explain contractual terms?

Yes.

Can evidence of prior statements be admitted to prove fraud?

Yes.

How might a promise to wash a car support a fraud claim?

The seller made the promise to induce agreement while having no intention of performing it.

Can evidence establish an oral condition precedent to a contract becoming effective?

Yes.

What is an example of a condition precedent to a contract becoming effective?

The parties agree that the contract will become effective only if the buyer obtains funding from her brother.

Does the parol evidence rule bar evidence of subsequent modifications?

No; subsequent modifications fall outside the rule’s scope.

What is a contract modification?

A later agreement changing an existing contract.

Does the traditional common-law rule require new consideration for a modification?

Generally, yes.

Does UCC Article 2 require new consideration for a modification?

No, but the modification must be made in good faith.

When may a common-law modification be enforceable without new consideration under the modern exception?

When it is fair and equitable in light of circumstances the parties did not anticipate when contracting.

Can the Statute of Frauds apply to a contract modification?

Yes; the modification may require a signed writing.

Does falling outside the parol evidence rule automatically make a modification enforceable?

No; the modification must still satisfy applicable requirements such as consideration, good faith, and the Statute of Frauds.

What should you identify first in a contract-terms question?

Whether common law or UCC Article 2 applies.

What timing distinction matters in a parol-evidence question?

Whether the communication occurred before, contemporaneously with, or after the written agreement.

What should you check in a warranty question?

The seller’s status, the warranty’s requirements, the goods’ intended use, and any relevant buyer reliance.

What should you check in a modification question?

The applicable law, consideration or an exception, good faith where required, and any writing requirement.