Problem 105

1. Problem 105 P computer system D MH Computers WWW pay Written K. Negotiated over 2 years by teams of lawyers. D cancelled purchase. P sues (?) D says oral understanding can cancel any time. Should J allow evidence of this?

2. Parol Evidence Rule • Bars evidence of prior agreements that are inconsistent with the written contract. • If the writing is complete, bars evidence of prior agreements that are “within the scope” of the written contract. • Note: May include contemporaneous. • Rule of substantive law – not evidence

3. Problem 106 D build dock/ use copper nails P Jane Hiram pay Written K. Construction begins. Hiram tells Jane she can use galvanized nails. She does. Hiram sues for breach. Jane offers evidence of agreement RE nails. Is evidence barred by Parol Evidence Rule?

4. Mitchill v. Lath Ds R/P P Laths Mrs. Mitchill $8400 P sues Ds for specific performance of agreement to remove ice house on property. P says relied on agreement in deciding to buy property.

5. Mitchill questions: • Would specific performance be an appropriate remedy? • Is the remedy at law adequate? • Did Ds promise to remove the ice house? • Do we care? Why or why not? • What is the basis of Ds’ objection to the evidence?

6. More Mitchill questions: • What if the ice house agreement had been in writing? • Does the Parol Evidence Rule always bar evidence of prior agreements? • What is the test for whether evidence is admitted?

7. When Parole Evidence Rule applies: • *Is the agreement in writing? • Does not require a writing. • Applies if there is a writing. • *Is the agreement final (integrated)? • Integrated means final. R2K209 • Can be fully or partially integrated. • In other words, is it a contract? *Ask these questions first. If no, not PER.

8. Mitchill questions continued: • Why didn’t the court ask these two questions? • What questions did the court ask? • What does it mean to be “collateral in form”?

9. Collateral agreements • If separate agreement, supported by separate consideration, evidence is not barred. • Not really parol evidence rule application – just different contract. • If not separate contract, can answer by asking the other questions. • What were the other questions?

10. Application of Parol Evidence Rule: • Does the offered agreement contradict the written K? • If yes, evidence not admitted. • If no, ask the next question. • Is the written K complete?* • If yes, evidence not admitted. • If no, and no contradiction, admit. *Was this the question the court asked??

11. Does agreement contradict K? • Majority says maybe. • Don’t need to decide. Why? • Dissent says no. • Does not change anything in the K. • If contradicts, contradicts idea of completeness. So really boils down to Q3 – is it complete? • Why do we ask this question? R2K §215 – If final agreement, no evidence to contradict.

12. Is the K complete? • What do we mean by this question? • Does the agreement contain everything agreed to by the parties? • Is the agreement complete as to the subject of the offered agreement? • Is the offered agreement within the scope of the written K? • Why do we ask this question? R2K §216 – Can supplement, unless court finds complete.

13. Approaches to completeness • 4 corners – Does it look complete? • “Traditional” – Objective • Would similarly situated parties naturally omit it from the writing? • “Modern” – Subjective • Did the parties intend the writing to be complete? (Look at UCC rule in next case.)

14. Policies and Effects of PER: • Why do we have such a rule? • Was a just result reached in this case? • What happens if evidence is barred? • Judge/jury (fact finder) distinction • What happens if evidence is admitted? • Considered by fact finder. • Still must prove happened.

15. Betaco v. Cessna D jet P Cessna Betaco $2,500,000 Cessna represented in cover letter that jet was “faster, more efficient, more range than Citation I.” Betaco concluded would not have more range with full passenger load. Betaco canceled; sued for breach of warranty.

16. Betaco questions: • Who prevails at the trial? • What is the PER issue? • Was the K fully integrated (complete) as to the warranty? • Did trial court admit evidence of the warranty? • What happens on appeal?

17. Is agreement complete? • Question of intent • Consider circumstances, negotiation, sophistication of parties, agreement itself (is it obviously incomplete?) • Is there an integration (entirety, merger) clause? • What’s that? • If there is, is that dispositive? Is it here?

18. UCC approach to completeness: • Would terms “certainly have been included” in the writing? (comment) • If so, inadmissible. • Lets more evidence in – more liberal. • Court remands to determine if intended to be complete, using this test. • Completeness is question of law, but can depend on facts. Need more facts here.

19. Betaco continued • What happened after remand? • D Ct found not [fully] integrated. Warranty evidence admissible. • 7th Cir reversed. Clearly erroneous. J/Cessna. Why? • Could all this have been avoided?

20. UCC PER – UCC § 2-202 • Terms in writing intended as final – may not contradict by prior agr or contemporaneous oral agr but mayexplain or supplement • By course of performance, course of dealing, or usage of trade; and • By evidence of consistent additional terms unless court finds writing intended to be complete.

21. Warranty evidence • Was there a warranty disclaimer in the agreement? • Does warranty “outside” of K contradict the disclaimer? • UCC 2-316 on exclusion of warranties – “subject to the provisions . . . on parol . . . evidence.”

22. Warranty exclusions UCC 2-316 warranty Exclude warranty warranty Exclude warranty Exclude warranty warranty

23. Luria v. Pielet Scrap Iron D scrap steel P Pielet Luria pay Did the parties have a K? Was it in writing? Did the writing contain at least some of the final terms of the agreement? What is D’s excuse for non-delivery?

24. What is a contradiction? • Limitation of absolute, right to cancel • Right of unilateral rescission not in K – • Right to cancel not in K – • Not admissible • Only “head-on” contradiction: night v. day, up v. down, red v. green – limitations limit, not contradict • Limitation on option not in K is admissible • Quantity “qualification” not in K is admissible

25. Application of UCC PER • Does evidence contradict the writing? • Court says yes. What if it had said no??? • If had made this agreement, would they certainly have included it in the K? • Court answers this question also. Yes. Still bars evidence. What if the K included “per our conversation”?

26. Lee v. Seagram & Sons Ps D (& other Lees) Capitol City Lees Seagram $ Ps allege D promised to relocate them in a new distributorship if sold Capitol City. Ps sue for breach of that agreement. D says promise barred by PER.

27. Lee questions: • Does the evidence contradict the writing? • Is the writing complete? (Is the agreement something the parties would ordinarily be expected to put in the writing?) • If it is, and they didn’t, it’s unlikely they agreed to this. Don’t allow the evidence.

28. Would parties ordinarily put in writing? • Complex contract. • No identity of parties. • Sale of corporate assets, promise to only certain individuals. • Relationship of trust and confidence. • Negotiated by different parties. • No integration clause. • Does this matter? What if had one?

29. Pym v. Campbell P shares Ds Pym Campbell, others pay Ds do not purchase. P sues for breach of K. Ds say they do not have a K. But P produces a copy of a written K. How can D say they do not have a K???

30. Oral condition precedent • What is a condition precedent? • R2K 217 – If parties agree orally that performance of K is subject to condition, K is not integrated with respect to the condition. • Does this mean it is not a contract?

31. PER application: • Is the K written? • Is it final? • Does the evidence contradict the writing? • Is the writing complete (as to the evidence)?

32. Pym questions: • Does this case conflict with Luria? • Would the Luria court have reached a different result in Pym? • Did the parties intend to be bound when they signed the “K” in Pym? • Did the parties intend to be bound when they signed the “K” in Luria?

33. Oral condition precedent • Distinguish: • Condition to performance of entire written agreement and • Condition to performance of obligations within K. • What is effect of an entirety clause? • What if there is a conflict with writing? • Is there a contract at all?

34. Mitchill v. Lath redux Assume that when Laths told Mrs. Mitchill that they could and would remove the ice house if she would buy the property, they in fact had no right or ability to do so, and they knew they did not. • Does the PER bar evidence of this agreement?

35. R2K 214(d) • Evidence of prior agreements and negotiations admissible to show • Illegality • Fraud • Duress • Mistake • Lack of consideration • Other invalidating cause – Not K

36. R2K 214 – other provisions: Also admissible to show • Writing not integrated (not final) • Whether complete or partial integration • Ground for remedy • Rescission, reformation, specific performance • Meaning of the writing