George Mason School of Law
Contracts II
Terms
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F.H. Buckley
fbuckley@gmu.edu
1
Next day
 Up to Scott 644
 (Note that I will add Scott 644-59 on
modification and waiver)
2
So now we have an enforceable contract
But what is its content?
3
Identifying the Terms and
Interpreting them
 Identifying: what are the terms
 Interpreting: what do they mean?
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Oral statements and the Parol
Evidence Rule
 In either case, do we look outside the
written contract?
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Oral statements
Course of dealings
Trade customs
Implied terms
Here’s a thought…
 Why not just ignore written
contracts?
 The letter enslaves and the spirit makes
free.
6
What would we lose if we
banned written contracts?
 Certainty as to terms
 Recall the rationale for the Statute of
Frauds in McIntosh p. 518
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What would we lose if we
banned written contracts?
 Certainty as to terms
 Adjudication and Litigation Costs
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What would we lose if we
banned written contracts?
 Certainty as to terms
 Adjudication and Litigation Costs
 Agency Costs of Seller’s Agents
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What happens where
there is a writing?
 First question: Is this
a binding contract?
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What happens where
there is a writing?
 Unsigned terms
 Birmingham TV v. Waterworks
 Restatement 211(1), Illustration 1
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What happens where
there is a writing?
 Is a signature
dispositive?
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Lady Gaga signs
an autograph
What happens where
there is a writing?
 Is a signature dispositive?
 Restatement 211(1), Illus. 3
13
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
What happens where
there is a writing?
 First question: Is this part of a binding
contract?
 Non est factum:
 Restatement §§ 163, Illustration 2
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Identifying the terms
 So assume we have a contract—but
what are its terms?
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Identifying the terms
 What is an integrated agreement
 Restatement 209(1)
 The presumption in 209(3)
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Identifying the terms
 What then is an UNintegrated
agreement?
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Identifying the terms
 What is the difference between a
completely and a partially integrated
agreement
 Restatement 210
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Can we look behind a signed written
contract for the terms of the contract?
 That’s all new (and confusing)
 The traditional Parol Evidence Rule
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Can we look behind a signed written
contract for the terms of the contract?
 That’s 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
Can we look behind a signed written
contract for the terms of the contract?
 That’s 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
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
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?
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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 546
25
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
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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
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Collateral Agreements
 The test in Mitchill v. Lath 546
Ice House
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Collateral Agreements
 How is this like my example
of the painting?
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Collateral Agreements
 What is the test of a collateral
agreement?
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Collateral Agreements
 The test in Mitchill v. Lath
 In form a collateral agreement
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Collateral Agreements
 The test in Mitchill v. Lath
 In form a collateral agreement
 Can’t contradict the written agreement
32
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
33
Masterson v. Sine
Jones v. Ahmanson
Escola v. Coca-Cola
Pacific Gas infra
Perez v. Sharp
Chief Justice Roger Traynor
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Masterson v. Sine
Chief Justice Roger Traynor
39
Justice Louis H. Burke
Masterson
 What was the contract?
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Masterson
Sale
 Dallas
Medora
Option to repurchase
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Masterson
Sale
 Dallas
Medora
Option to repurchase
 What was the oral modification?
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Masterson
 What was the oral modification?
 Dallas reserves an option to repurchase
which does not convey to his assigns
(i.e., trustee in bankruptcy)
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Masterson
 What happens if an agreement is fully
integrated per Traynor?
44
Masterson
 What happens if an agreement is fully
integrated per Traynor?
 Parol evidence can’t be admitted to add
to or vary terms
45
Masterson
 How to tell if a writing is completely
or partially integrated per Traynor?
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Masterson
 How to tell if a writing is completely
or partially integrated per Traynor?
 “Any such collateral agreement must itself
be examined…”?
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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
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
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
2-202
50
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
2-202
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Masterson
 What does it means to say that the
Parol Evidence Rule is a rule of
substantive law and not of evidence?
P. 554
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Masterson
 Are Burke’s charges correct?
 The change contradicts a term which
would ordinarily be supplied by operation
of law.
53
How does the Restatement
handle this?
 Which way does the Restatement
come down? Traynor or Burke?
 Cf. § 210(3) comment
54
How does the Restatement
handle this?
 Which way does the Restatement
come down? Traynor or Burke?
 Cf. § 214
55
How does the Restatement
handle this?
 Which way does the Restatement
come down? Traynor or Burke?
 Cf. § 215
56
How does the Restatement
handle this?
 Which way does the Restatement
come down? Traynor or Burrke?
 Cf. § 216
 Terms omitted naturally: Illustration 7
57
How does UCC 2-202
handle this?
 The writing may be explained or
supplemented with consistent
additional terms unless the writing
was intended as complete and
exclusive
58
How does UCC 2-202
handle this?
 Comment 3: Admit oral evidence
unless it would “certainly” have been
included in the writing?
59
How does UCC 2-202
handle this?
 What happened in Hunt Foods 557
60
How does UCC 2-202
handle this?
 What happened in Hunt Foods 557
George Doniler
73%
Eastern Can
61
Option to
purchase stock
Hunt Foods
How does UCC 2-202
handle this?
 Hunt Foods
 What was the allegedly omitted term?
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How does UCC 2-202
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
How does UCC 2-202
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
How does UCC 2-202
handle this?
 Hunt Foods
 Were these sophisticated parties?
65
George Mason School of Law
Contracts II
Terms
F.H. Buckley
fbuckley@gmu.edu
66
Next day
 Up to Scott 644
 (Note that I will add Scott 644-59 on
modification and waiver)
67
Masterson v. Sine
Chief Justice Roger Traynor
68
Justice Louis H. Burke
Must one always look to parol
evidence?
Chief Justice Roger Traynor
69
Justice Louis H. Burke
How does UCC 2-202
handle this?
 Hunt Foods
 “It is not sufficient that the existence of
the [oral] condition is implausible. It
must be impossible.”
70
How does UCC 2-202
handle this?
 Snyder 560
 What was the alleged omitted term?
71
Twin Lakes Garden Apartments
Beltsville MD
How does UCC 2-202
handle this?
 Snyder
 Is a cancellation clause inconsistent with
the written contract?
 Why might Greenbaum have wanted to
exclude unilateral exit rights?
72
How does UCC 2-202
handle this?
 Snyder
 Is a cancellation clause inconsistent with
the written contract?
 Why was the Hunt Foods reasoning
rejected?
73
Can one bargain around this?
 Traynor at 551:
 “The instrument itself may help resolve
the issue”
74
Merger Clauses: UAW at 562
Doral Resort and Country Club, Miami
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Merger Clauses: UAW
 What did the contract say about
cancellation rights?
 And how was the merger clause
phrased?
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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
Merger Clauses: UAW
You tellin’
me I should
stay at a
scab
hotel!!!
Concerned Union Executive “Nix”
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Merger Clauses: UAW
 Roush’s evidence
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Merger Clauses: UAW
 Markman: Can the parties bargain
around the “threshold question” of
whether a contract is completely
integrated with a merger clause?
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Merger Clauses: UAW
 Markman: Can the parties bargain
around the “threshold question” of
whether a contract is completely
integrated with a merger clause?
 Otherwise, what’s the point of a merger
clause?
 The specter of “super merger” clauses
81
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
Merger Clauses: UAW
 Can you think of something the UAW
could have done to satisfy its
concerns?
83
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
Merger Clauses: UAW
 Dueling quotes from Corbin
 Pp. 565, 566, 571, 572, 573
85
Merger Clauses: UAW
 What was the allegation of fraud?
86
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
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
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?
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Merger Clauses: UAW
 Recall Danann on merger clauses and fraud
at 418

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Negatived reliance on an representation
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
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
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
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
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
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
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
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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
UAW
 On Holbrook’s analysis, what does a
merger clause do?
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UAW
 On Holbrook’s analysis, what does a
merger clause do?
 What sense do you make of
restatement § 216, cmt e
100
UAW
 Does a merger clause always work?
 Why not in Seibel at 577
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UAW
 How would Markman have decided
Hachmeister at p. 572?
102
UCC 2-316(1)
 What if anything does this do to
merger clauses?
103
George Mason School of Law
Contracts II
Interpretation
F.H. Buckley
fbuckley@gmu.edu
104