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

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1 1 George Mason School of Law Contracts II Terms F.H. Buckley

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?  Conditions and Warranties  Mistake 3

4 Identifying the Terms and Interpreting them  In any event, do we look outside a written contract? Oral statements Course of dealings Trade customs 4

5 Some jargon  What is Parol Evidence? The Parol Evidence Rule as a legal presumption 5

6 Some jargon  What is Parol Evidence? The Parol Evidence Rule as a legal presumption Merger Clauses 6

7 Some jargon  What is Parol Evidence? The Parol Evidence Rule as a legal presumption Merger Clauses Textualism 7

8 Some jargon  What is Parol Evidence? The Parol Evidence Rule as a legal presumption Merger Clauses Textualism  Four Corners rule 8

9 Some jargon  Textualism and Contextualism 9

10 What would we lose if we banned written contracts?  Certainty as to terms Recall the rationale for the Statute of Frauds in McIntosh p

11 What would we lose if we banned written contracts?  Certainty as to terms  Adjudication and Litigation Costs 11

12 What would we lose if we banned written contracts?  Certainty as to terms  Adjudication and Litigation Costs  Agency Costs of Seller’s Agents 12

13 What happens where there is a writing?  First question: Is this a binding contract? 13 Lady Gaga signs an autograph

14  First question: Is this part of a binding contract? Recall Merit Music at 429  “I imagined it was a note.” 14 What happens where there is a writing?

15  First question: Is this part of a binding contract? Signed writings: Restatement § 211(a) 15 What happens where there is a writing?

16  First question: Is this part of a binding contract? Non est factum: Restatement § 163, Illustration 2 Restatement §§ 211(c), 214(d) 16 What happens where there is a writing? 16

17  First question: Is this part of a binding contract? Birmingham TV p What happens where there is a writing?

18 Can we look behind a signed written contract for the terms of the contract?  Integrated Agreements: Restatement § 209(1), comment a 18

19 Can we look behind a signed written contract for the terms of the contract?  Integrated Agreements: Completely and Partially Integrated Writings: Restatement §

20 Can we look behind a signed written contract for the terms of the contract?  Integrated Agreements: Completely and Partially Integrated Writings: Restatement § 210 Ch 210(3): what happened to the parol evidence rule? 20

21 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 21

22 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  Fully integrated writings: Restatement § 213(2) 22

23 Limits to the Parol Evidence Rule  Additional terms supplied by statute or courts  Omitted Essential Terms  Collateral Agreements 23

24 Limits to the Parol Evidence Rule  Additional terms supplied by statute or courts  Good title: UCC §  Merchantability: UCC §  Fitness for purpose: UCC §

25 Limits to the Parol Evidence Rule  Omitted essential terms: Restatement § 204  The one-year term on employment in McIntosh at

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 B sells a painting to A for $400 in an oral agreement. Problems? 26

27 Limits to the Parol Evidence Rule: 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  The test in Mitchill v. Lath 28 Ice House

29 Collateral Contracts  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 written agreement 29

30 Collateral Contracts  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  What was the oral agreement here? 30

31 Collateral Contracts  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 31

32 Collateral Contracts Would the ice house covenant naturally be found in the land sale contract? What would Williston say? 32 Chief Judge Irving Lehman 32

33 Integration: Masterson v. Sine 33 Chief Justice Roger Traynor Jones v. Ahmanson Escola v. Coca-Cola Pacific Gas infra Perez v. Sharp

34 Integration: Masterson v. Sine 34 Chief Justice Roger Traynor Justice Louis H. Burke

35 Integration: Masterson v. Sine  What was the deal? 35

36 Integration: Masterson v. Sine  What was the deal? 36 Dallas and Rebecca Masterson Medora and Lu Sine (sister and brother-in-law) ranch

37 Integration: Masterson v. Sine  What was the deal? 37 Dallas and Rebecca Masterson Medora and Lu Sine (sister and brother-in-law) Option to repurchase

38 Integration: Masterson v. Sine  What rights does a trustee in bankruptcy have? 38

39 Integration: Masterson v. Sine  What rights does a trustee in bankruptcy have? The commencement of a case … creates an estate. Such estate is comprised of all the following property:  all legal or equitable interests of the debtor in property as of the commencement of the case. 39

40 Integration: Masterson v. Sine  What rights does a trustee in bankruptcy have? So could the trustee step in the shoes of Masterson to assert the option What do you infer from the fact that the trustee wanted to do so? 40

41 Integration: Masterson v. Sine  What was the alleged oral modification? 41

42 Integration: Masterson v. Sine  What was the oral modification? Dallas reserves an option to repurchase which does not convey to his assigns 42

43 Integration: Masterson v. Sine  What was the oral modification? What happens if an agreement is fully integrated per Traynor? 43

44 Integration: Masterson v. Sine  What was the oral modification? What happens if an agreement is partly integrated per Traynor? 44

45 Integration: Masterson v. Sine  What was the oral modification? How to tell if a writing is completely or partially integrated per Traynor? 45

46 Integration: Masterson v. Sine  What was the oral modification? How to tell if a writing is completely or partially integrated per Traynor?  “Any such collateral agreement must itself be examined…”?? 46

47 Integration: Masterson v. Sine  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…”??? 47

48 Integration: Masterson v. Sine  What was the oral modification? How to tell if a writing is completely or partially integrated per Traynor?  Does that mean that contextualism is imposed in every case? 48

49 Integration: Masterson v. Sine  What is the policy argument for contextualism? 49

50 Integration: Masterson v. Sine  What is the policy argument for contextualism? “the party urging the spoken as against the written word is most often the economic underdog” 50

51 Integration: Masterson v. Sine  What is the policy argument for contextualism? “the party urging the spoken as against the written word is most often the economic underdog” Is that the case here? 51

52 Integration: Masterson v. Sine  What is the policy argument for textualism? 52

53 Integration: Masterson v. Sine  What is the policy argument for textualism? Written evidence as more accurate than memory 53

54 Integration: Masterson v. Sine  What is the policy argument for textualism? Written evidence as more accurate than memory Juror bias 54

55 Integration: Masterson v. Sine  What is the policy argument for textualism? Written evidence as more accurate than memory Juror bias [Uncertainty and Litigation costs?] 55

56 Integration: Masterson v. Sine  Traynor on Parol Evidence Would the reference excluding assigns “naturally be made as a separate agreement”? 56

57 Integration: Masterson v. Sine  Traynor on Parol Evidence Would the reference excluding assigns “naturally be made as a separate agreement”? Do you agree with Traynor? 57

58 Masterson  Are Burke’s charges correct? 58

59 Masterson  Are Burke’s charges correct? Does this undermine the security of real estate title searches? 59

60 Masterson  Are Burke’s charges correct? Opens the door, albeit unintentionally, to a new technique for defrauding creditors? 60

61 Masterson  Are Burke’s charges correct? Opens the door, albeit unintentionally, to a new technique for defrauding creditors?  Was Burke being too generous? 61

62 Masterson  Are Burke’s charges correct? The change contradicts a term which would ordinarily be supplied by operation of law. 62

63 How does the Restatement handle this?  Which way does the Restatement come down? Cf. §§ 209(2), 210(3),

64 How does the Restatement handle this?  Which way does the Restatement come down? But cf. §§ 211(1), 215,

65 How does the Restatement handle this?  Collateral agreements Cf. §§ 216(2)(c) 65

66 How does the Restatement handle this?  Collateral agreements Cf. § 216  Separate consideration: Illustration 3  Terms omitted naturally: Illustration 7 66

67 How does UCC handle this? 67

68 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 68

69 How does UCC handle this?  Comment 3: would the oral term “certainly” have been included in the writing? 69

70 How does UCC handle this?  Comment 3: would the oral term “certainly” have been included in the writing? How does this compare with restatement § 216(2)(b): would the oral term “naturally” be omitted? 70

71 How does UCC handle this?  Comment 3: would the oral term “certainly” have been included in the writing? How does this compare with restatement § 216(2)(b): would the oral term “naturally” be omitted?  Which language is narrower? 71

72 How does UCC handle this?  Comment 3: would the oral term “certainly” have been included in the writing? How does this compare with restatement § 216(2)(b): would the oral term “naturally” be omitted?  In Masterson, might the term have naturally but not certainly been included? 72

73 73 George Mason School of Law Contracts II Terms F.H. Buckley

74 Next day  Scott casebook: Conditions  Scott casebook: Warranties  Scott article on ww.buckleysmix.com under American Illness 74

75 Textualism and Contextualism  Departures from Textualism 75

76 Textualism and Contextualism  Departures from Textualism Collateral agreements 76

77 Textualism and Contextualism  Departures from Textualism Collateral agreements Contextualism  The prior question of whether a writing is fully integrated Traynor and the Restatement 77

78 How does UCC handle this?  Hunt Foods What was the allegedly omitted term? 78

79 How does UCC handle this?  Hunt Foods What was the allegedly omitted term?  The option to purchase to be used only if Doliner shopped Eastern Can around 79

80 How does UCC handle this?  Hunt Foods What was the allegedly omitted term?  Why do you think Hunt refused to include the term in the writing? 80

81 How does UCC handle this?  Hunt Foods What is the standard for determining whether parol evidence might be considered? 81

82 How does UCC handle this?  Hunt Foods What is the standard for determining whether parol evidence might be considered?  “It is not sufficient that the existence of the condition is implausible. It must be impossible.” 82

83 How does UCC handle this?  Hunt Foods What is the standard for determining whether parol evidence might be considered?  What about Hunt’s ultimatum? 83

84 How does UCC handle this?  Hunt Foods What is the standard for determining whether parol evidence might be considered?  What about Hunt’s ultimatum?  Were these sophisticated bargainers? 84

85 How does UCC handle this?  Snyder p. 560 What was the alleged omitted term? 85

86 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? 86

87 What is the effect of a Merger Clause?  Traynor at

88 Merger Clauses  Danann at 418 Alleged fraudulent representations about operating profits on a lease of a building 88

89 The Merger Clause in Danann  Absent the merger clause, what result? The representations would ordinarily be excluded by the Parole Evidence Rule 89

90 The Merger Clause in Danann  Absent the merger clause, what result? The representations would ordinarily be excluded by the Parole Evidence Rule  Here however the fraud exception to the Parole Evidence Rule would apply 90

91 The Merger Clause in Danann  Absent the merger clause, what result? The representations would ordinarily be excluded by the Parole Evidence Rule  Here however the fraud exception to the Parole Evidence Rule would apply, but for the merger clause. 91

92 The Merger Clause in Danann  Absent the merger clause, what result? The representations would ordinarily be excluded by the Parole Evidence Rule  Here however the fraud exception to the Parole Evidence Rule would apply, but for the merger clause. Was the draftsmanship important? 92

93 Merger Clauses: UAW 93 Doral Resort and Country Club, Miami

94 Merger Clauses: UAW You tellin’ me I should stay at a scab hotel!!! Concerned Union Executive 94

95 Merger Clauses: UAW  Roush’s evidence Cf. footnote 20 95

96 Merger Clauses: UAW  Can you think of something the UAW could have done to satisfy its concerns? 96

97 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 97

98 Merger Clauses: UAW  Can the parties bargain around contextualism with a merger clause? Markman’s spectre of “super-merger” clauses 98

99 Merger Clauses: UAW  Williston and Corbin on merger clauses Do they end up in the same place?  Dueling quotes from Corbin Pp. 565, 566, 571, 572,

100 Merger Clauses: UAW  Williston and Corbin on merger clauses Do they end up in the same place? 100

101 Merger Clauses: UAW  Does fraud corrupt all? In what circumstances, per Markman? 101

102 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? 102

103 Merger Clauses: UAW  What was the allegation of fraud? 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? 103

104 Merger Clauses: UAW  On Holbrook’s analysis, what does a merger clause do? 104

105 Merger Clauses: UAW  On Holbrook’s analysis, what does a merger clause do?  What sense do you make of restatement § 216, cmt e 105

106 Merger Clauses: UAW  On Holbrook’s analysis, what does a merger clause do? Seibel at 577 on inconspicuous clauses 106

107 Merger Clauses: UAW  How would Markman have decided Hachmeister at p. 572? 107

108 Textualism and Contextualism  How would you resolve the debate? 108

109 Textualism and Contextualism  How would you resolve the debate? Do the parties to the contract get a right to choose? 109

110 Textualism and Contextualism  How would you resolve the debate? Do the parties to the contract get a right to choose? Suppose the presumptive rule is textualism: how might the parties bargain around this? 110

111 Textualism and Contextualism  Suppose the presumptive rule is textualism: how might the parties bargain around this? Include more detail Recitals: “Whereas….” No merger clause 111

112 Textualism and Contextualism  Suppose the presumptive rule is contextualism: how might the parties bargain around this? Trainor? 112

113 Textualism and Contextualism  Suppose the presumptive rule is contextualism: how might the parties bargain around this? Trainor? Merger Clauses 113

114 Textualism and Contextualism  Suppose the presumptive rule is contextualism: how might the parties bargain around this? Trainor? Merger Clauses??? Choice of Law 114

115 115 George Mason School of Law Contracts II Interpretation F.H. Buckley


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