George Mason School of Law
Contracts II
Terms
F.H. Buckley
fbuckley@gmu.edu
1
So now we have an enforceable contract
But what is its content?
2
Identifying the Terms and
Interpreting them
 Identifying: what are the terms
 Interpreting: what do they mean?
 Conditions and Warranties
 Mistake
3
Identifying the Terms and
Interpreting them
 In any event, do we look outside a
written contract?
 Oral statements
 Course of dealings
 Trade customs
4
Some jargon
 What is Parol Evidence?
 The Parol Evidence Rule as a legal
presumption
5
Some jargon
 What is Parol Evidence?
 The Parol Evidence Rule as a legal
presumption
 Merger Clauses
6
Some jargon
 What is Parol Evidence?
 The Parol Evidence Rule as a legal
presumption
 Merger Clauses
 Textualism
7
Some jargon
 What is Parol Evidence?
 The Parol Evidence Rule as a legal
presumption
 Merger Clauses
 Textualism
 Four Corners rule
8
Some jargon
 Textualism and Contextualism
9
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
10
What would we lose if we
banned written contracts?
 Certainty as to terms
 Adjudication and Litigation Costs
11
What would we lose if we
banned written contracts?
 Certainty as to terms
 Adjudication and Litigation Costs
 Agency Costs of Seller’s Agents
12
What happens where
there is a writing?
 First question: Is this
a binding contract?
13
Lady Gaga signs
an autograph
What happens where
there is a writing?
 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?
 First question: Is this part of a binding
contract?
 Signed writings: Restatement § 211(a)
15
What happens where
there is a writing?
 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?
 First question: Is this part of a binding
contract?
 Birmingham TV p. 431
17
Can we look behind a signed written
contract for the terms of the contract?
 Integrated Agreements:
 Restatement § 209(1), comment a
18
Can we look behind a signed written
contract for the terms of the contract?
 Integrated Agreements:
 Completely and Partially Integrated
Writings: Restatement § 210
19
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
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
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
Limits to the Parol Evidence Rule
 Additional terms supplied by statute
or courts
 Omitted Essential Terms
 Collateral Agreements
23
Limits to the Parol Evidence Rule
 Additional terms supplied by statute
or courts
 Good title: UCC § 2-312
 Merchantability: UCC § 2-314
 Fitness for purpose: UCC § 2-315
24
Limits to the Parol Evidence Rule
 Omitted essential terms: Restatement
§ 204
 The one-year term on employment in
McIntosh at 516
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?
26
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 546
27
Collateral Contracts
 The test in Mitchill v. Lath
Ice House
28
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
Integration: Masterson v. Sine
Jones v. Ahmanson
Escola v. Coca-Cola
Pacific Gas infra
Perez v. Sharp
Chief Justice Roger Traynor
33
Integration: Masterson v. Sine
Chief Justice Roger Traynor
34
Justice Louis H. Burke
Integration: Masterson v. Sine
 What was the deal?
35
Integration: Masterson v. Sine
 What was the deal?
Dallas and Rebecca Masterson
ranch
Medora and Lu Sine
(sister and brother-in-law)
36
Integration: Masterson v. Sine
 What was the deal?
Dallas and Rebecca Masterson
Option to
repurchase
Medora and Lu Sine
(sister and brother-in-law)
37
Integration: Masterson v. Sine
 What rights does a trustee in
bankruptcy have?
38
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
Integration: Masterson v. Sine
 What was the alleged oral
modification?
41
Integration: Masterson v. Sine
 What was the oral modification?
 Dallas reserves an option to repurchase
which does not convey to his assigns
42
Integration: Masterson v. Sine
 What was the oral modification?
 What happens if an agreement is fully
integrated per Traynor?
43
Integration: Masterson v. Sine
 What was the oral modification?
 What happens if an agreement is partly
integrated per Traynor?
44
Integration: Masterson v. Sine
 What was the oral modification?
 How to tell if a writing is completely or
partially integrated per Traynor?
45
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
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
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
Integration: Masterson v. Sine
 What is the policy argument for
contextualism?
49
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
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
Integration: Masterson v. Sine
 What is the policy argument for
textualism?
52
Integration: Masterson v. Sine
 What is the policy argument for
textualism?
 Written evidence as more accurate than
memory
53
Integration: Masterson v. Sine
 What is the policy argument for
textualism?
 Written evidence as more accurate than
memory
 Juror bias
54
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
Integration: Masterson v. Sine
 Traynor on Parol Evidence
 Would the reference excluding assigns
“naturally be made as a separate
agreement”?
56
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
Masterson
 Are Burke’s charges correct?
58
Masterson
 Are Burke’s charges correct?
 Does this undermine the security of real
estate title searches?
59
Masterson
 Are Burke’s charges correct?
 Opens the door, albeit unintentionally, to
a new technique for defrauding
creditors?
60
Masterson
 Are Burke’s charges correct?
 Opens the door, albeit unintentionally, to
a new technique for defrauding
creditors?
 Was Burke being too generous?
61
Masterson
 Are Burke’s charges correct?
 The change contradicts a term which
would ordinarily be supplied by operation
of law.
62
How does the Restatement
handle this?
 Which way does the Restatement
come down?
 Cf. §§ 209(2), 210(3), 214
63
How does the Restatement
handle this?
 Which way does the Restatement
come down?
 But cf. §§ 211(1), 215, 216
64
How does the Restatement
handle this?
 Collateral agreements
 Cf. §§ 216(2)(c)
65
How does the Restatement
handle this?
 Collateral agreements
 Cf. § 216
 Separate consideration: Illustration 3
 Terms omitted naturally: Illustration 7
66
How does UCC 2-202
handle this?
67
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
68
How does UCC 2-202
handle this?
 Comment 3: would the oral term
“certainly” have been included in the
writing?
69
How does UCC 2-202
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
How does UCC 2-202
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
How does UCC 2-202
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
George Mason School of Law
Contracts II
Terms
F.H. Buckley
fbuckley@gmu.edu
73
Next day
 Scott casebook: Conditions
 Scott casebook: Warranties 659-68
 Scott article on ww.buckleysmix.com
under American Illness
74
Textualism and Contextualism
 Departures from Textualism
75
Textualism and Contextualism
 Departures from Textualism
 Collateral agreements
76
Textualism and Contextualism
 Departures from Textualism
 Collateral agreements
 Contextualism
 The prior question of whether a writing is
fully integrated
 Traynor and the Restatement
77
How does UCC 2-202
handle this?
 Hunt Foods
 What was the allegedly omitted term?
78
How does UCC 2-202
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
How does UCC 2-202
handle this?
 Hunt Foods
 What was the allegedly omitted term?
 Why do you think Hunt refused to include
the term in the writing?
80
How does UCC 2-202
handle this?
 Hunt Foods
 What is the standard for determining
whether parol evidence might be
considered?
81
How does UCC 2-202
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
How does UCC 2-202
handle this?
 Hunt Foods
 What is the standard for determining
whether parol evidence might be
considered?
 What about Hunt’s ultimatum?
83
How does UCC 2-202
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
How does UCC 2-202
handle this?
 Snyder p. 560
 What was the alleged omitted term?
85
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?
86
What is the effect of a Merger Clause?
 Traynor at 551
87
Merger Clauses
 Danann at 418
 Alleged fraudulent representations about
operating profits on a lease of a building
88
The Merger Clause in Danann
 Absent the merger clause, what
result?
 The representations would ordinarily be
excluded by the Parole Evidence Rule
89
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
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
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
Merger Clauses: UAW
Doral Resort and Country Club, Miami
93
Merger Clauses: UAW
You tellin’
me I
should stay
at a
scab
hotel!!!
Concerned Union Executive
94
Merger Clauses: UAW
 Roush’s evidence
 Cf. footnote 20
95
Merger Clauses: UAW
 Can you think of something the UAW
could have done to satisfy its
concerns?
96
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
Merger Clauses: UAW
 Can the parties bargain around
contextualism with a merger clause?
 Markman’s spectre of “super-merger”
clauses
98
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, 573
99
Merger Clauses: UAW
 Williston and Corbin on merger
clauses
 Do they end up in the same place?
100
Merger Clauses: UAW
 Does fraud corrupt all?
 In what circumstances, per Markman?
101
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
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
Merger Clauses: UAW
 On Holbrook’s analysis, what does a
merger clause do?
104
Merger Clauses: UAW
 On Holbrook’s analysis, what does a
merger clause do?
 What sense do you make of
restatement § 216, cmt e
105
Merger Clauses: UAW
 On Holbrook’s analysis, what does a
merger clause do?
 Seibel at 577 on inconspicuous clauses
106
Merger Clauses: UAW
 How would Markman have decided
Hachmeister at p. 572?
107
Textualism and Contextualism
 How would you resolve the debate?
108
Textualism and Contextualism
 How would you resolve the debate?
 Do the parties to the contract get a right
to choose?
109
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
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
Textualism and Contextualism
 Suppose the presumptive rule is
contextualism: how might the parties
bargain around this?
 Trainor?
112
Textualism and Contextualism
 Suppose the presumptive rule is
contextualism: how might the parties
bargain around this?
 Trainor?
 Merger Clauses
113
Textualism and Contextualism
 Suppose the presumptive rule is
contextualism: how might the parties
bargain around this?
 Trainor?
 Merger Clauses???
 Choice of Law
114
George Mason School of Law
Contracts II
Interpretation
F.H. Buckley
fbuckley@gmu.edu
115