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27 Cards in this Set
- Front
- Back
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Status of Writing: Is it final, complete, exclusive?
a. These questions help judge decide if this is a final contract. |
b. Factors courts consider:
i. Inclusion of Merger or Integration Clause • This is a factor judge will consider in deciding if contract is meant to be final and complete. However, its presence does not 100% make sure contract is final and complete. • Was language clear and unambiguous? • Was language buried in fine print? ii. Disclaimer of Warranties • There are no additional warranties. iii. Whether extrinsic term is one parties certainly would have included in document had it been part of their agreement. iv. Sophistication of Parties • Did parties know what they were doing? Generally, consumers sign all those documents (merger/disclaimer), but ordinary Joe doesn’t understand or even read and court will throw documents out. • Each party has attorneys –assume people knew what was going on. • More sophisticated and longer they spent dealing more likely court will uphold contract as final/complete/exclusive. V. Nature and Scope of negotiations |
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Significance of Conclusion:
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i. Final, complete, exclusive = no added terms
ii. Final = can add consistent additional terms iii. Non-final = can add contrary terms |
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Type of evidence offered: Is it consistent additional term?
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Would Certainly’ Test
i. If asserted term would certainly have been in writing if agreed = not a consistent additional term, but a contradictory term ii. If asserted term might naturally have been left out of writing = consistent additional term b. Significance of Conclusion: i. If consistent additional term, can supplement final writing ii. If contradictory term; cannot be offered if writing is final |
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• Key Points re: Parol Evidence Rule
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a. One party’s confirmation is not a final writing
b. PER applies to bar only prior or contemporaneous evidence i. Loop Hole: Promises made AFTER contract can be used as evidence – PE Rule does not apply. (parties can in good faith agree to add. terms to the K) ii. Same thing if they promise something before, and re-promise after- it can be brought in b/c it was also promised after |
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Key Points re: Parol Evidence Rule Cont..
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c. Course of performance, course of dealing, usage of trade can always be used to supplement or explain writing.
d. PE Rule excludes written evidence as well as oral evidence. i. Previous drafts of contract are banned based on PE Rule e. Merger clause is not conclusive, but absence of merger clause tends to indicate an incomplete or non-exclusive writing |
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f. Common law doctrines can be used to attack final complete exclusive writing.
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i. Fraud
ii. Duress iii. Unconsciousability iv. Mutual mistake |
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PER Bars Evidence – Betaco, Inc v. Cessina Aircraft
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a. P (Buyer) filed action to recover deposit paid to D (Seller) on a K to purchase airplane after P discovered range of aircraft was less than sales person indicated. District court allowed extrinsic evidence.
b. Court reversed, holding parol evidence rule barred introduction of extrinsic evidence. Question of parties intent was factual and here, language of contract was plain and clear [document was only 2 pages in length], purchaser was an experienced businessman and pilot, purchaser understood integration clause, purchase agreement itself addressed issue of range of aircraft with specificity, and it disclaimed other warranties. Further, purchaser had opportunity to make changes to final document and parties were of equal bargaining power. i. Based on above, court found K was final, complete and exclusive. Integration clause/ disclaimed warranties & strongly reinforced this. |
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• Usage of Trade – C-Thru Container Corp v. Midland mfg. Co
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a. D (Midland) in a K, agreed to purchase bottle- making equipment from P (C-thur) and to make bottles for P. D was to pay for equipment by giving P a credit against manufactured bottles.
b. P ordered bottles from another source, claiming that in numerous phone calls, D stated they were unable to make required bottles for P. c. P argued D breached by not making bottles. D argued could have made bottles, but P never placed order. P argued it was trade usage for supplier to provide samples before order is placed. D claims this was not in K, and K was complete and unambiguous and therefore usage of trade cannot be used. d. Trial Court granted Summary Judgment to D. Reversed by Appellate Court. e. Iowa Supreme Court agreed w/Appellate Court: PE may be used to supplement a fully integrated agreement if evidence falls within definition of usage of trade. K does not have to be ambiguous in order to use usage of trade. i. Official comment to 2-202 “definitely rejects” a requirement langu |
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Usage of Trade – C-Thru Container Corp v. Midland mfg. Co contin….
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i. Official comment to 2-202 “definitely rejects” a requirement language of contract be ambiguous as a condition precedent to admission of trade- usage evidence.
f. Even “complete” contract may be explained or supplemented by parol evidence of trade usages. i. Official comment: “commercial sales contracts ‘are to be read on assumption course of prior dealings between parties and usages of trade were taken for granted when document was phrased.” |
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Express Warranties
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a. No magic words need be used and while having below elements in writing is plus, credibility is only requirement. Any of following will suffice:
i. Affirmation of Fact; or • i.e. ‘This is a new car’ ii. Promise; or • i.e. ‘If it doesn’t work, I’ll fix it’ iii. Description of Goods; or • i.e. ‘When it arrives, it will be painted orange’ or ‘These are Original Seats’ • Goods must conform to description. iv. Sample or Model • i.e. ‘It will look just like one over here’ • Goods must conform to sample or model v. Any of above – Must become a basis of bargain!!! |
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Not required for expressed Warranty
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vi. Not Required →
• Use of words ‘warranty’ or ‘guaranty’ • Seller’s Intent does not matter! • Does not have to be in Writing o Conduct → may be expressed by conduct rather than words. o Pictures →Illustrations in Sales catalogs create express warranties goods will conform to pictures |
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Express Warranties vs. Puffing
PUFFING |
i. Puffing: Does not create a Warranty
• Affirmation merely of value of goods • Seller’s opinion/commendation of goods o Ask: Whether reasonable buyer would have relied on seller’s comments? o The more specific makes it more likely to be a warranty. o Example: ‘If you buy car everyone is going to think you’re hot’ |
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Express Warranties vs. Puffing
Express |
ii. Express Warranty
• More likely when seller’s statements have specific content o Example: ‘This car gets 30 miles/gallon’ – Specific content • Context makes buyer’s reliance reasonable |
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iii. Warranty vs. Puffing = Fact Question
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Relative Knowledge → Courts consider relative knowledge of parties
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Express Warranty must be part of Basis of Bargain
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i. Not only must alleged warranty ‘relate to goods,’ it must go to ‘basis of bargain’→Not main reason, just a reason.
• Seller has burden of proof to show buyer’s lack of reliance • Buyer makes prima facie by showing buyer made purchase after seller made representations --- burden then shifts, and seller must demonstrate buyer did not rely; statement did not form part of basis of bargain. • Post Transaction Affirmation → Seller may create express warranty after formation of contract; precise timing of affirmation not material |
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Unread Warranties
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What if seller makes express warranty, but buyer does not learn of it until after sale? (Buyer sees old advertisement)
• Can Recover – Buyer claims they are third party beneficiary of express warranty made to those who did see warranty and purchased as a result of it. • Can’t Recover – Seller claims unread warranty is not part of basis of bargain. iii. Hard for seller to win ‘basis of bargain’ arguments |
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• Implied Warranties
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a. Unless expressly negated by parties or circumstances, they arise by operation of law in every sale of goods, new or used, as part of seller’s cost of doing business.
i. Used Goods also get warranty of merchantability. Does not mean used goods are warranted to perform as new goods |
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Implied Warranties of Merchantability (Most important of all warranties
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Imposed upon ‘merchant w/respect to goods of kind,’ unless disclaimed
--ii. Normally, this warranty arises in all sales transactions, except sales by private individuals or occasional sales by professionals who normally deal in other markets. |
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Implied Warranties of Merchantability (Most important of all warranties
Difficult to determine |
• What if new to business? Doesn’t matter
• What if you don’t regularly sell items but hold yourself as an expert? • When seller is not an expert; does not hold themselves as an expert; and sale was an incidental sale and person usually does not sell these goods- seller is not considered a merchant in that area of goods. |
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Implied Warranties of Merchantability
Example |
iii. Example: Sawmill A is closing and sells to Sawmill B a used saw. Saw is damaged and Sawmill B claims A was a merchant. Court said Sawmill A was not a merchant, they sell wood not saws- incidental sale
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Content of Implied Warranty of Merchantability – What does it cover?
6 req first 3 |
• Contract Description→ Capable of passing w/o objection in trade under contract description
o Ex: If object sold is a car, it’d better have an engine inside • Fungible Goods→ fungible goods must be of fair average quality i.e. bulk (not whole) of good must hover around middle belt of quality. o Fungible Goods: can be interchanged w/o comment (grain); owner does not care whether original goods are returned as long as like quantity is delivered. • Fit for Ordinary Purpose → Goods must be fit for ordinary purpose for which such goods are used. o Most important standard of Merchantability |
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Content of Implied Warranty of Merchantability – What does it cover?
6 req last 3 |
• Variation w/in Normal Limits→ goods must ‘run w/in variations permitted by agreement, of even kind, quality and quantity w/in each unit and among all units involved’
o Merchants are required to adhere to established standards in multi-unit deliveries of merchandise. • Adequately Contained, Packaged and Labeled→ Goods must also be ‘adequately contained, packaged and labeled as agreement may require.’ o Some items are expected to be labeled (medicine); some are expected to be packaged (china). o Section applies only where nature of goods and of transaction require certain type of container, package, or label. • Conforms to Label→ Goods must conform to promises of affirmations of fact made on container or lab |
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Breach of Implied Warranty of Merchantability –
Phillips v. Cricket Lighters |
a. P’s child got a hold of lighter and caught house on fire. P claims breach of implied warranty of merchantability b/c no child safety measures on lighter. Court reversed, holding Summary Judgment should not have been granted to D.
b. Concept of merchantability does not require goods be in best quality…but it does require they be free from significant defects |
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§2-318(a) Third Party Beneficiaries of Warranties- Express or Implied
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i. Warranty of seller, express or implied, extends to any natural person who is in family or household, or his buyer, or who is a guest in his home, if it is reasonable to expect such a person may use, consume, or be affected by goods and who is personally injured by breach of warranty.
d. Section requires household members be affected by product, and therefore warranty extends to 2- yr. old. Factual issue as to whether lack of child safety measures made lighter defective –therefore no SJ. |
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Implied Warranty of Fitness for a Particular Purpose:
ELEMENTS |
a. Three Elements:
i. Seller had reason to know buyer’s particular purpose ii. Seller had reason to know buyer relied on seller’s skill or judgment to furnish appropriate goods iii. Buyer in fact relied on seller’s skill or judgment to furnish appropriate goods. |
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Implied Warranty of Fitness for a Particular Purpose:
ANALYSIS |
b. Objective Test → ‘Reason to know.’ Actual knowledge is NOT required.
c. Meaning of Particular Purpose → Different from their ordinary purpose. d. Merchant or Non-Merchant Seller |
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Breach of Implied Warranty of Fitness for a Particular Purpose –
Leal v. Holtvogt |
a. P was learning about horses from D, when P decided to purchase stallion for breeding. D suggested P buy 50% interest of D’s stallion [knowing he was lame]. P purchased interest and horse later died. P claims breach of warranty of fitness for a particular purpose. Court agreed.
b. Court goes through 3 part test c. B/c all 3 elements were present, implied warranty was given. Next you have to see if it was breached. It was breached – lameness can affect breading. • PJ: Bring all three warranty claims if you think they could be met |
