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

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

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

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

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

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

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

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

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

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

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

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

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

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

14  Is this an integrated agreement? §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. 14 Integrated Agreements 14

15  Is this an integrated agreement? §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.  Does this always permit oral evidence? 15 Integrated Agreements 15

16  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. 16 Complete Integration 16

17  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.  So no parol evidence of any kind:  Can’t add to, vary or contradict 17 Complete Integration 17

18  Restatement § 213(2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope.  I.e., can’t “add to, vary or contradict” 18 Complete Integration: Can’t “Add to” 18

19  Restatement §210 (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. 19 Partial Integration 19

20  Restatement §210 (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.  So oral evidence can “add to” the terms 20 Partial Integration 20

21  Whether completely or partially integrated: § 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 21

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

23  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 Partial Integration: Can “Add to” 23

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

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

26 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.  Can the oral agreement be enforced? 26

27 Collateral Contracts  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

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

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

30 Alexandria, Payne and Commerce Street 30

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

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

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

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

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

36 Collateral Agreements  The test in Mitchill v. Lath In form a collateral agreement Can’t 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? 36

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

38 Collateral Agreements 38 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.

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

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

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

42 Masterson v. Sine 42 Chief Justice Roger Traynor Justice Louis H. Burke

43 Masterson  What was the contract? 43

44 Masterson  DallasMedora 44 Sale Option to repurchase

45 Masterson  DallasMedora  What was the oral modification? 45 Sale Option to repurchase

46 Masterson  What was the oral modification? Dallas reserves an option to repurchase which does not convey to his assigns (i.e., trustee in bankruptcy) 46

47 Masterson  What happens if an agreement is fully integrated per Traynor? 47

48 Masterson  What happens if an agreement is fully integrated per Traynor? Parol evidence can’t be admitted to add to or vary terms 48

49 Masterson  How to tell if a writing is completely or partially integrated per Traynor? 49

50 Masterson  How to tell if a writing is completely or partially integrated per Traynor?  “Any such collateral agreement must itself be examined…”? 50

51 Masterson  How to tell if a writing is completely or partially integrated per Traynor?  So can a court ever restrict itself to the writing? Or was this about the absence of a merger clause? 51

52 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”: Wigmore 52

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

54 Masterson  Are Burke’s charges correct? The change contradicts a term which would ordinarily be supplied by operation of law. 54

55 How does the Restatement handle this?  Which way does the Restatement come down? Traynor or Burke? 55

56 How does the Restatement handle this?  §214. Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish  (a) that the writing is or is not an integrated agreement;  (b) that the integrated agreement, if any, is completely or partially integrated;  (c) the meaning of the writing, whether or not integrated;  (d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause;  (e) ground for granting or denying rescission, reformation, specific performance... 56

57 How does the Restatement handle this?  Which way does the Restatement come down? Traynor or Burke? Cf. § 210(3) comment: “a writing cannot prove its own completeness” 57

58 58 George Mason School of Law Contracts II Terms © F.H. Buckley Not for sharing

59 Last day  The evisceration of the parol evidence rule in California 59

60 How does UCC handle this?  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. 60

61 How does UCC handle this?  Comment 3: Admit oral evidence unless it would “certainly” have been included in the writing 61

62 Compare to the common law standard  Admit parol evidence if the terms would “naturally be made as a separate agreement”: Restatement 216 UCC is more ready to admit parol evidence: Admit unless the terms would “certainly have been included in the agreement” 62

63 What can be admitted as parol evidence 63 Terms that would not certainly be included in the agreement: UCC Terms naturally made in a separate agreement: Restatement

64 How does UCC handle this?  What happened in Hunt Foods

65 How does UCC handle this?  What happened in Hunt Foods 562  How was this an Article 2 transaction? 65

66 How does UCC handle this?  What happened in Hunt Foods 557 George Doniler 66 Eastern Can 73% Hunt Foods Asset purchase agreement

67 How does UCC handle this?  What happened in Hunt Foods 557 George Doniler 67 Eastern Can 73% Hunt Foods Option to purchase stock

68 How does UCC handle this?  Hunt Foods What was the allegedly omitted term? 68

69 How does UCC handle this?  Hunt Foods What was the allegedly omitted term?  Option to be exercised only if Doliners shopped around 69

70 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 Hunt have rejected this? 70

71 How does UCC handle this?  Hunt Foods How did the court interpret UCC 2-202? 71

72 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.” 72

73 How does UCC handle this?  Hunt Foods Were these sophisticated parties? 73

74 Can the impossibility standard be met?  Snyder 565 What was the alleged omitted term? 74 Twin Lakes Garden Apartments Beltsville MD

75 Can the impossibility standard be met?  Snyder Is a cancellation clause inconsistent with the written contract?  Why might Greenbaum have wanted to exclude unilateral exit rights? 75

76 Can the impossibility standard be met?  Snyder Is a cancellation clause inconsistent with the written contract?  Why was the Hunt Foods reasoning rejected? 76

77 Can the impossibility standard be met?  Snyder Is a cancellation clause inconsistent with the written contract?  The court’s standard: “an absence of reasonable harmony” 77

78 Can one bargain around this?  Traynor at 547: “The instrument itself may help resolve the issue” 78

79 Can one bargain around this?  Traynor at 547: “The instrument itself may help resolve the issue” But “Any such [oral] collateral agreement itself must be examined … to determine whether the parties intended [it] to be included” 79

80 Can one bargain around this?  Traynor at 547: Are we running into a rule of paternalism here? 80

81 Can one bargain around this?  Traynor at 547: Should the parties be permitted to bargain back into the parol evidence rule? 81

82 Can one bargain around this?  Traynor at 551: Should the parties be permitted to bargain back into the parol evidence rule? And just how would they do this? 82

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

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

85 Merger Clauses: UAW  How was the merger clause phrased? 85

86 Merger Clauses: UAW  How was the merger clause phrased?  What was the alleged omitted term? 86

87 Merger Clauses: UAW You tellin’ me I should stay at a scab hotel!!! Concerned Union Executive “Nix” 87

88 Merger Clauses: UAW  Roush’s evidence 88

89 Merger Clauses: UAW  Markman: Can the parties bargain around the “threshold question” of whether a contract is completely integrated with a merger clause? 89

90 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? 90

91 Merger Clauses: UAW  Can you think of something the UAW could have done to satisfy its concerns? 91

92 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 92

93 Merger Clauses: UAW  What was the allegation of fraud? 93

94 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? 94

95 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? 95

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

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

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

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

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

101 So when can parol evidence be introduced? 101

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

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

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

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

106 So when can parol evidence be introduced?  Subsequent modifications  UCC 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 106

107 So when can parol evidence be introduced?  Oral conditions: Restatement 217 E.g., this agreement is not operative if… 107


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