1. Parol Evidence Rule (Common Law Rule)
    • A binding integrated agreement
    • discharges prior agreements
    • to the extent that is is consistent with them.
  2. Integrated Agreement - Define
    An agreement that is complete and final
  3. Parol Evidence Rule deals with finding:

    It does not preclude: (3 things)
    • Parol Evidence – deals with FINDING THE AGREEMENT & the initial terms of the deal
    • · Not about modification

    · Not about formation

    · Not about interpretation

    A parol evidence issue arises when one party offers evidence of an obligation and the other party claims that that obligation is not part of the parties' agreement. That parol evidence might be an oral understanding, a writing, or a trade usage.
  4. UCC Parol Evidence Rule
    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 performance, course of dealing,
    • or usage of trade (Section 1-303); 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.
  5. 4 Questions to Ask with Parol Evidence Issues
    Prove your Purpose is Intended not to Supplement(add to)/Contradict!

    • 1- What is the party offering to Prove?
    • 2- For what purpose is the evidence being offered?
    • 3- Did the parties intend the writing to contain the final and complete statement of their agreement?
    • 4- Does the evidence offered contradict or supplement the writing?
  6. Parole Evidence will not bar this type of evidence:
    Keep your Intepretation Separate & form your Modification to the consumer & set a precedent

    • - a Separate agreement with separate consideration
    • - An Interpretation
    • - Modifications (modify an already formed agreement)
    • - Formation Issues (fraud)
    • - evidence of a Condition Precedent
    • - Evidence of violation of Consumer Protection Act
  7. UCC - Implied Terms Rule
    • When the parties to a bargain sufficiently defined to be a
    • contract have not agreed with respect to a term which is essential to a determination of their rights and duties, a term which is reasonable in the circumstances is supplied by the court.
  8. Implying Termination Rule
    • Except on the happening of an agreed event, implying terms for terminating the contract requires that reasonable notification be received by the other party
    • HOWEVER an agreement dispensing with notification is
    • invalid if its operation would be unconscionable.
  9. Every Contract is Subject to What Duty?
    Both the UCC and the Restatement generally provide that every contract is subject to good faith requirements, which cannot be disclaimed by agreement.
  10. Define Duty of Good Faith
    Honesty in fact and the observance of reasonable commercial standards of fair dealing.
  11. Warranty - Define

    Promise - Define
    Warranty is just a type of promise that is made by a party (implied or express).

    • ·Promise is a manifestation of intention to act or refrain from acting in a specified way, so made as to justify a promisee in understanding that a
    • commitment has been made.
  12. Express Warranty Definition

    - when does it arise
    • ·An Express Warranty is an affirmation of fact or
    • promise.

    • ·Express warranties themselves may arise from
    • what is said, what is written in the contract, and from other circumstances.

    • ·A representation of fact can constitute an
    • express warranty.
  13. Puffery - what is it?
    If it is NOT an affirmation of fact OR a promise... it is an opinion and is considered to be mere puffery & will not create a warranty.
  14. Disclaiming Express Warranty

    • BE IN WRITING & MUST BE CONSPICIOUS. all implied warranties are excluded by expressions like 'as is'." Does not have to be conspicuous
    • Seller makes a warranty by describing the goods.
    • When words create warranty and other words negate warranty, the negation is inoperative.

    • Courts presume that anything illustrative of
    • goods is a standard-creating sample, unless the seller states expressly that the goods to be sold are of a lesser quality or standard.
  15. Implied Warranty of Merchantability
    - Elements
    - Rule
    • - Seller Must be a merchant
    • - Transaction must involve Goods

    Unless other disclaimed, the goods MUST be merchantable, and pass without objection in the trade and be fit for ordinary purposes.
  16. Requirements to Disclaim Implied Warranty of Merchantability
    In the case of a writing must be conspicuous & must mention Merchantability.
  17. Warranty of Goods for A particular Purpose
    • 1) Where the seller has reason to know any particular purpose for which the goods are required
    • 2) the buyer is relying on the seller's skill or judgment to select or furnish suitable goods,
    • 3) unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.
  18. R2K Rule for Modifications
    • A promise modifying a duty under a contract
    • not fully performed on either side is binding, if the modification is fair and equitable in view of circumstances not anticipated by the parties when the contract was
    • made
    • While the contract is executory, (before it has been fully performed by either party) the parties may agree to change at least one of those duties. The old duty is discharged and replaced in the contract by the new duty. Whether there is consideration for this bargain is frequently an issue...
    • ***note under the UCC that modifications do not need consideration to be binding, but they must be done in good faith***
  20. Mutual Recission - DEFINE
    Before any performance has begun, the parties essentially call off the contract, each party agreeing not to look to the other for performance of the duties. There is consideration for this bargain because each party has agreed to give up a claim against the other.
  21. Pre- Existing Duty Rule
    If a party merely promises to do what it is already bound to do, then this promise cannot be consideration for a return promise.

    ***note under the UCC that modifications do not need consideration to be binding***
  22. Modification Questions
    • - Common Law or UCC?
    • - Good Faith?
    • - Circumstances unforseen
    • - If Under the UCC, would the statute of Frauds apply?
  23. Waiver - Define
    A waiver is a knowing relinquishment of a right. Unlike a modification, a waiver can arise through the conduct of one party.

    An attempt at modification or recission can act as a waiver.
  24. Retracting a Waiver
    • A party who has made a waiver affecting an executory portion of the contract may retract the waiver by reasonable notification received by the other party that strict performance will be required of any term waived, unless the retraction would be unjust in view of a material change of position in reliance on the waiver.
    • The waiver can be retracted while the contract is executory (that is, remaining to be performed), but once the contract has been performed, it is too late to argue that the modification is not enforceable.
  25. Discharge of a debt by Substititue Rule
    • To validate a discharge of a debt, there must
    • be a sufficient consideration or consideration-substitute.

    Any of the following, delivered and accepted "in full satisfaction,"would be a sufficient consideration:

    • 1. payment of a lesser amount earlier than due;
    • 2. payment of a lesser amount at a different place from the agreed place of payment;
    • 3. a "gift of a horse, hawk, or robe , etc.," as the payment;

    three exceptions to the rule (Note that payment of a lesser sum cannot be satisfaction for the whole).
  26. Excuses for not performing
    • Other party fails to perform
    • Anticipatory Repudation
    • Reasonable Grounds for Insecurity
    • Common Law Material Breach or UCC Perfect Tender Rule
    • Non-Occurence of an Express Condition (condition precedent)
    • Impossibility / Impracticability
    • Frustration of Purpose
  27. Anticipatory Repudiation
    - Define
    - Rule
    is an unequivocal indication that the party will not perform when performance is due, or a situation in which future non-performance is inevitable.

    An anticipatory breach gives the non-breaching party the option to treat such a breach as immediate, and, if repudiatory, to terminate the contract and sue for damages (without waiting for the breach to actually take place).

    • - If material, excuses further contract performance by the non-breaching party.
    • - Requires an unequivocal indication of intention not to perform.
    • If one party has reasonable grounds for insecurity
    • Demand adequate reassurance
    • If commercially reasonable can discontinue performance until adequate reassurance is received
    • Determine if the assurance offered was adequate
    • If not adequate stop performance all together
  29. COMMON LAW - Material Breach Concept
    Improper Performance
    A material breach is a substantial failure to perform that permits the other party to the contract to either compel performance, or collect damages because of the breach.

    NOTE: if the performance is substantial, then the breach is not material.
  30. UCC Perfect Tender Rule
    If the goods or tender of delivery fail in any respect to conform to the contract, the buyer may reject.

    A buyer who RIGHTFULLY rejects the goods does not have to pay for the goods & is excused from performing.
  31. Distinction between Common Law Material Breach & UCC Perfect Tender Rule
    - UCC Perfect tender allows breach if the goods fail in any respect

    - Common Law states that there must be a MATERIAL breach to excuse performance.
  32. Non-Occurence of an Express Condition
    • - it is a conditional promise, that excuses performance if the condition is not satisfied.
    • ***important to note that the parties to the contract must not act in a way that would intentionally damage the contract***
  33. Condition precedent defined

    Condition Subsequent defined (used to limit a contractual obligation)
    A condition is a condition precedent when it is a prerequisite to the parties' performance obligation.

    A condition is a condition subsequent when it imposes a post-contractual limitation on the duty to perform.
  34. Impossibility


    Frustration of Purpose
    Impossibility excuses performance when the performance has become impossible. (examples: destruction of the thing; death of a contract party for personal services / legal impossibility or it becomes illegal)

    Impracticabilty excuses performance when the performance is still possible but can only be done at excessive or unreasonable cost.

    Frustration of Purpose excuses performance when an unanticipated event affects the mutually understood purpose for the contract performance.


    Damages have to be certain, foreseeable and unavoidable.

    Certainty - To be compensable, lost profits must be shown with reasonable certainty.

    Foreseeability - The breaching party must have been able, at the time of the contract formation, to reasonably have foreseen the loss its breach could ultimately cause.

    • UnAvoidable - breaching parties are not liable for damages that the non-breaching party could have avoided.
    • HOWEVER a non-breaching party does not have to mitigate if to do so would require undue risk, burden or humiliation.

    No emotional distress or Punitive Damages in Contract Damages
  38. LIQUIDATED DAMAGES aka Agreed damages
    • While parties can set the amount of damages for breach, the amount of Liquidated damages cannot do more than compensate.
    • The damages must be reasonable in the light of the anticipated loss.
  39. If a breaching party is not able to show damages are certain of foreseeable, damages are awarded based on
    • factors that determine these damages:
    • out of pocket costs that were incurred by the non-breaching party in reliance on the contract
    • Benefit Conferred on the D by the P
    • Appreciation or knowledge by the D of the benefit
    • Acceptance or Retention of the benefit by the D under circumstances making it inequitable for the D to retain the benefit.
  41. UnJust Enrichment Rule
    • Where a person accepts services from another,
    • having reason to know that the other is under a belief that the recipient or a third person has promised compensation or is otherwise under a duty to pay for them, the recipient is liable for the reasonable value of the services irrespective of their value to him.
  42. 3rd Party Beneficiary Rule
    A party claiming 3rd Party Beneficiary must establish that the contracting parties intended, upon execution of the contract, to bestow a direct, as opposed to an incidental, benefit upon the third party.
  43. Modification of the Rights of a 3PB
    • the parties to the contract “retain power to
    • discharge or modify the duty by subsequent agreement” without the third-party beneficiary’s assent, at any time until the third-party beneficiary, without notice of the discharge or modification, materially changes position in justifiable reliance on the promise, brings suit on the promise or manifests assent to the promise at the request of the promisor or promisee.
  44. Assignment & Delegation
    • Assignment of Rights --> tend to be freely assignable
    • Default: Allows assignment of rights
    • NOTE: Even though assigned, Original party is still liable

    EXCEPTION to freely assignable: IF both parties agree PER the contract that the contract is not assignable, and if you try to assign it the contract is grounded.

    • Delegation of Duties have a higher standard
    • ***Normally allowed, Exception: Personal Performance
    • NOTE: original party is still liable

    Novation -Must have all three assenting parties

    • NOTE: only way that the original party is off
    • the hook for liability
Card Set
Contracts II - Final