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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.

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Presentation on theme: "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."— Presentation transcript:

1 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

2 Next day Up to Scott 644 (Note that I will add Scott on modification and waiver) 2

3 So now we have an enforceable contract But what is its content? 3

4 Identifying the Terms and Interpreting them Identifying: what are the terms Interpreting: what do they mean? 4

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

6 Heres a thought… Why not just ignore written contracts? The letter enslaves and the spirit makes free. 6

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

8 What would we lose if we banned written contracts? Certainty as to terms Adjudication and Litigation Costs 8

9 What would we lose if we banned written contracts? Certainty as to terms Adjudication and Litigation Costs Agency Costs of Sellers Agents 9

10 What happens where there is a writing? First question: Is this a binding contract? 10

11 What happens where there is a writing? Unsigned terms Birmingham TV v. Waterworks Restatement 211(1), Illustration 1 11

12 What happens where there is a writing? Is a signature dispositive? 12 Lady Gaga signs an autograph

13 What happens where there is a writing? Is a signature dispositive? Restatement 211(1), Illus. 3 13

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

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

16 So assume we have a contractbut what are its terms? 16 Identifying the terms 16

17 What is an integrated agreement Restatement 209(1) The presumption in 209(3) 17 Identifying the terms 17

18 What then is an UNintegrated agreement? 18 Identifying the terms 18

19 What is the difference between a completely and a partially integrated agreement Restatement Identifying the terms 19

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

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

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

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

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

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

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

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

28 Collateral Agreements The test in Mitchill v. Lath Ice House

29 Collateral Agreements How is this like my example of the painting? 29

30 Collateral Agreements What is the test of a collateral agreement? 30

31 Collateral Agreements The test in Mitchill v. Lath In form a collateral agreement 31

32 Collateral Agreements The test in Mitchill v. Lath In form a collateral agreement Cant contradict the written agreement 32

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

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

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: Πs fail no. 3 and maybe no. 2 And why is that? 35

36 Collateral Agreements Would the ice house covenant naturally be found in the land sale contract? 36 Chief Judge Irving Lehman 36

37 Collateral Agreements Just how broad is the exception to the parol evidence rule? 37

38 Masterson v. Sine 38 Chief Justice Roger Traynor Jones v. Ahmanson Escola v. Coca-Cola Pacific Gas infra Perez v. Sharp

39 Masterson v. Sine 39 Chief Justice Roger Traynor Justice Louis H. Burke

40 Masterson What was the contract? 40

41 Masterson DallasMedora 41 Sale Option to repurchase

42 Masterson DallasMedora What was the oral modification? 42 Sale Option to repurchase

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

44 Masterson What happens if an agreement is fully integrated per Traynor? 44

45 Masterson What happens if an agreement is fully integrated per Traynor? Parol evidence cant be admitted to add to or vary terms 45

46 Masterson How to tell if a writing is completely or partially integrated per Traynor? 46

47 Masterson How to tell if a writing is completely or partially integrated per Traynor? Any such collateral agreement must itself be examined…? 47

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

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

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

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

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

53 Masterson Are Burkes charges correct? The change contradicts a term which would ordinarily be supplied by operation of law. 53

54 How does the Restatement handle this? Which way does the Restatement come down? Traynor or Burke? Cf. § 210(3) comment 54

55 How does the Restatement handle this? Which way does the Restatement come down? Traynor or Burke? Cf. §

56 How does the Restatement handle this? Which way does the Restatement come down? Traynor or Burke? Cf. §

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

58 How does UCC handle this? The writing may be explained or supplemented with consistent additional terms unless the writing was intended as complete and exclusive 58

59 How does UCC handle this? Comment 3: Admit oral evidence unless it would certainly have been included in the writing? 59

60 How does UCC handle this? What happened in Hunt Foods

61 How does UCC handle this? What happened in Hunt Foods 557 George Doniler 61 Eastern Can 73% Hunt Foods Option to purchase stock

62 How does UCC handle this? Hunt Foods What was the allegedly omitted term? 62

63 How does UCC 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

64 How does UCC 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

65 How does UCC handle this? Hunt Foods Were these sophisticated parties? 65

66 66 George Mason School of Law Contracts II Terms F.H. Buckley

67 Next day Up to Scott 644 (Note that I will add Scott on modification and waiver) 67

68 Masterson v. Sine 68 Chief Justice Roger Traynor Justice Louis H. Burke

69 Must one always look to parol evidence? 69 Chief Justice Roger Traynor Justice Louis H. Burke

70 How does UCC handle this? Hunt Foods It is not sufficient that the existence of the [oral] condition is implausible. It must be impossible. 70

71 How does UCC handle this? Snyder 560 What was the alleged omitted term? 71 Twin Lakes Garden Apartments Beltsville MD

72 How does UCC handle this? Snyder Is a cancellation clause inconsistent with the written contract? Why might Greenbaum have wanted to exclude unilateral exit rights? 72

73 How does UCC handle this? Snyder Is a cancellation clause inconsistent with the written contract? Why was the Hunt Foods reasoning rejected? 73

74 Can one bargain around this? Traynor at 551: The instrument itself may help resolve the issue 74

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

76 Merger Clauses: UAW What did the contract say about cancellation rights? And how was the merger clause phrased? 76

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

78 Merger Clauses: UAW You tellin me I should stay at a scab hotel!!! Concerned Union Executive Nix 78

79 Merger Clauses: UAW Roushs evidence 79

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

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

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

83 Merger Clauses: UAW Can you think of something the UAW could have done to satisfy its concerns? 83

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

85 Merger Clauses: UAW Dueling quotes from Corbin Pp. 565, 566, 571, 572,

86 Merger Clauses: UAW What was the allegation of fraud? 86

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

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

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

90 Merger Clauses: UAW Recall Danann on merger clauses and fraud at 418 Negatived reliance on an representation 90

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

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

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

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

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

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

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

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

99 UAW On Holbrooks analysis, what does a merger clause do? 99

100 UAW On Holbrooks analysis, what does a merger clause do? What sense do you make of restatement § 216, cmt e 100

101 UAW Does a merger clause always work? Why not in Seibel at

102 UAW How would Markman have decided Hachmeister at p. 572? 102

103 UCC 2-316(1) What if anything does this do to merger clauses? 103

104 104 George Mason School of Law Contracts II Interpretation F.H. Buckley


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