Parol Evidence Rule/ Best Evidence Rule/ Statute of Frauds

05-08

A. Parol Evidence Rule – Words of Parties

1. Vocabulary

a. Parol Evidence Rule – if there is an integrated agreement, the court cannot even consider parol evidence that contradicts the integrated agreement

b. Parol Evidence – evidence of words of the parties, spoken or written agreement, before the time of the integrated agreement

c. Integrated Agreement – written version of agreement that court finds as final. To determine if integrated, court takes into account the specific circumstances of the transaction involved (e.g., are the parties strangers) and asks whether parties like these situated as they are would naturally and normally include in their writing the extrinsic matter that is sought to be introduced. If not, then admissible.

d. Complete Integration – written & final & complete

e. Partial Integration – written & final, but not complete

f. Merger Clause – K provision that states the contract is complete on its face (strengthens presumption that written agreement is final

g. Reformation – any litigation to change or add to original agreement (usually based on mutual mistake)

2. Exceptions

a. Mistake of integration exception (i.e. clerical mistakes)

- Inconsistencies are NOT exception (P/E applies)

b. Formation defect exception (i.e. rescission)

c. Explanation exception (e.g. ambiguous terms) – does not add or change, but gives meaning)

d. Condition precedent exception – failure of the condition to occur may be shown despite what would otherwise be deemed a total integration

e. Collateral agreementsexception – if it does not contradict or vary the main contract and if it is not so closely connected as to be part of the main contract (i.e. concerns subject that similarly situated parties would not ordinarily be expected to include in the written instrument)

f. Subsequent modifications exception – NEVER a P/E issue

3. Consistent Additional TermsIssue (i.e. something left out of the written K)

a. P/E prevents a court from considering earlier agreements as a source of additional terms

b. UNLESS, the court finds that the written agreement was only a partial integration (i.e. depends on whether written agreement is integrated)

4. Comparison of S/F & P/E

a. S/F – question of formation (i.e., parties 「orally agreed」), thus a defense of formation issue

b. P/E – terms issue (i.e. 「written agreement」 is compete integration), thus mistake in integration issue

B. Conduct of Parties

1. Relevant in (i) explaining words in K, & (ii) filling gaps. The hierarchy of considerations is:

a. Express Terms – specific terms in K are given greater weight than general terms; separately negotiated terms given greater weight than standardized boilerplate terms

b. Course of performance – same parties have done under this K (prior performance)

c. Course of dealing – same parties have done under earlier, similar K (prior K)

d. Custom & usageof trade – words/customs common to a particular business; what others have done under similar K

C. UCC Terms

1. "Gap-Filler" Terms – for situations where certain terms are not included in a contract for the sale of goods

a. Price – if (i) not specified, or (ii) price left open but parties fail to agree on price, or (iii) price is to be fixed by some standard but has not been set, then the price is a reasonable price at the time for delivery.

b. Place of Delivery – if not specified, the place is the sellers place of business, or else sellers home. BUT, if goods have been identified and parties know goods are elsewhere, then that is place of delivery.

c. Place of Delivery – if not specified, the place is the sellers place of business, or else sellers home. However, if the goods have been identified as the ones to satisfy the contract and the parties know that they are in some other place, then that is the place of delivery.

d. Time for Shipment or Delivery – if not specified, shipment/delivery is due in a reasonable time.

e. Time for Payment – if not specified, payment due at the time and place at which the buyer is to receive the goods.

f. Assortment – if contract provides for assortment of goods is to be delivered but does not specify which party is to choose, the assortment is to be at the buyers option, unless buyer unreasonably delays

2. Seller』s delivery obligation (in Sale of Goods)

a. Non-carrier K

(i) Seller must place & hold goods at buyer』s disposition for time sufficient for buyer to take possession

(ii) Absent an agreement as to place of delivery, the place of delivery is the seller』s place of business

b. Common Carrier K

(i) Shipment K – seller completes his delivery obligation when he (i) gets the goods to a common carrier, (ii) make reasonable arrangement for delivery, & (iii) notifies the buyer

Common types: C&F (cost and freight); CIF (cost, insurance, and freight)

NOTE: this is the default if the K is for shipment to the buyer and no F.O.B. term is supplied.

(ii) Destination K – seller doesn』t complete his delivery obligation until goods reach buyer

- NOTE: determining whether K is shipment or destination using FOB (free on board)

(a) FOB + seller city – shipmentK

(b) FOB + any other city – destination K

3. Risk of Loss

a. Sale of Goods K

(i) Risk of Loss – after K, but before Buyer gets goods, goods are damaged & neither party is to blame

(a) If risk of loss is on Buyer – Buyer pays the full K price for the damaged or destroyed goods;

(b) If risk of loss is on Seller – Seller has to provide new goods at no cost to the Buyer

(ii) Basic Rules for Risk of Loss

(a) Agreement of the parties controls

(b) Breach – breaching party is liable for any uninsured loss even though breach is unrelated

- Shipment K – delivered to shipper

- Destination K – delivered to Buyer

(d) If Non-carrier (NOTE: whether the buyer is a merchant is irrelevant):

- Non-merchant – Seller tenders delivery (i.e. makes goods availabe)

- Merchant – Buyer takes possession (i.e. takes physical possession)

(S → B)

If seller is non-merchant – when Seller tenders delivery

when goods are delivered to the shipper

when seller tenders delivery of goods to the Buyer at the destination

If seller is merchant –

when Buyer takes possession

b. UCC 2A (Leases of personal property)

(i) Risk of loss is on the lessor;

(ii) Finance Lease Exception – risk of loss is on the lessee

4. Warranties

a. Sale of Goods K – 4 types of warranties

(i) Express Warranty

(a) Words – fact or promise (NOT opinion)

(b) Conduct – sample or model

(ii) Implied Warranty of Merchantability (「goods are fit for the ordinary purpose for which such goods are used」) – when any person buys any goods from any merchant, this warranty term is automatically added to the K by operation of law

(a) Seller must be a MERCHANT (deals in goods of that kind)

(b) Goods must be ordinarily purpose of seller (e.g. no warranty if simply selling company car)

- NOTE: serving food or drink on premises is sale of goods subject to warranty of merchantability

(iii) Implied Warranty of fitness for particular purpose – any seller, (i) knows the particular purpose for which goods are to be used & (ii) buyer is relying on seller』s skill/judgment to select suitable goods

(a) E.g.: Buyer asks clerk for advice on what shoes to wear to job interview, & store clerk recommends inappropriate shoes

- NOTE: difference of warranty of fitness for particular purpose & warranty of merchantability

- 「merchantable」 means goods are generally acceptable,

- 「fitness for a particular purpose」 means goods are specifically suitable

(iv) Implied Warranty of title & against infringement:

(a) Warranty of title – any seller impliedly warrants good title, no liens/encumbrances. If breached, buyer may rescind K, revoke acceptance of goods, or sue for damages (value=price).

(b) Warranty against infringement – a merchantseller warrants goods are delivered free of any patent, trademark, copyright, or similar claims

b. UCC 2A (Leases of personal property)

(i) Lessor has same warranties as a seller of goods (express, merchantability, & fitness)

(ii) Finance Lease Exception – warranties made by the supplier to lessor are enforceable by lessee, BUT, lessee cannot stop making payments to bank because the car is defective

5. Contractual Limitations on warranty liability:

a. Disclaimer (both sales & leases)

(i) Express warranties – can NOT be disclaimed

(ii) Implied warranties – can be disclaimed

(a) Language such as – 「as is」 or 「with all faults」; OR

(b) Conspicuous language of disclaimer (e.g. mentioning merchantability)

b. Limitation of remedies (e.g., 「warranty liability shall be limited to…」) – does not eliminate warranty, but simply limits or sets recovery for any breach of warranty (e.g. computer software where buyer must click to agree to the terms is valid)

(i) Damages – possible to limit remedies for both express and/or implied warranties

- General test is unconscionability(e.g. inconspicuous limitations are deemed unconscionable)

(ii) Personal Injury – from breach of warranty on consumer goods, that』s prima facie unconscionability.

B. Best Evidence Rule (Original Document Rule)

1. Definition T a party seeking to prove the contents of a writing, must eitherproduce the original writing or provide an acceptable excuse for its absence

a. Applies to writings (letters, words,or numbers set down in any form) – butalso includes sound recordings, X-ray, films, photographs, computer stored data

(i) 「Original」 photograph includesnegatives or any prints made;

(ii) 「Original」 computer-stored dataincludes any printout or other output readable by sight.

b. If reasonable excuse isacceptable – may introduce secondary evidence of the original (e.g. oraltestimony or a copy)

2. When the Best Evidence Ruleapplies

a. Writing is Legally Operative Document – writing itself creates rights andobligations (deed, mortgage)

b. Where witness is testifying tofacts learned solely from reading in a writing

3. When NOT apply

a. Fact to be proved exists independent of non-legally operative writingwhen a witness with personal knowledge testifies (e.g. birth date – no requirementof birth certificate)

b. Writing is collateral to litigated issue

c. Certified copies of Public Record

d. Summaries of Voluminous Record – provided thatoriginal records would be admissible and available

4. What qualifies as the 「originalwriting」

a. Writing itself

b. Duplicates – any counterpartproduced by any mechanical means that accurately reproduced the original(e.g., photocopy, carbon copy, computer print-outs) – duplicate is admissibleto same extent as original

(i) UNLESS a genuine question is raised as to authenticity of original, OR

(ii) it would be unfair to admit the duplicate (e.g.,blurry)

- Handwritten copy is NEITHER anoriginal nor duplicate

5. Excuses for non-production oforiginal (persuaded by preponderance of evidence)

a. Lost or cannot be found withdue diligence (proponent made reasonable/diligent search to find original)

b. Destroyed without bad faith

c. Cannot be obtained with legalprocess

- HYPO: A fire destroys original written K, and while P has an accuratecopy of the K, P chooses to prove the terms of the K by his testimony – thetestimony is admissible b/c the original was destroyed and not in bad faith byP, so P has discretion to offer any other evidence (doesn』t have to be copy).

C. Statute of Frauds – certain agreements must be inwriting to prove that alleged agreement was made

NOTE: Formal K NOT required for SOF (writing can be a signed receipt or even anemail with a typed signature

1. Writing Required – SOF requires one or more writings, signed by the party to becharged, that:

a. reasonably identify thesubject matter of the contract;

b. indicate that a contracthas been made between the parties; and

c. state with reasonablecertainty the essential terms of the unperformed promises – identityof the parties, description of subject matter & terms necessary to make Kdefinite (e.g. quantity for UCC K)

2. Contracts within S/F – MY LEGS: Marriage, not withinone Year,Land, Executors (or administrator), Goodsfor $500 or more & leases for 1K or more, Surety:

a. Promise in consideration of marriage

(i) Covers pre/post nuptial agreements

(ii) NOT include a mere promise tomarry

b. Service K NOT capable of being performed within 1 year from time of K

- E.g. a promise to pay money for2 years does not have to be evidenced by a signed writing b/c promise could befully performed within one year by paying the money early.

(i) Specific time period – S/Lapplicable (look for specific dates, more than a year from date of K)

(ii) 1 Year begins to run fromthe K date

(iii) Specific performance – NO S/L (because capable within 1 year)

(iv) NOTE: lifetime K』s NOTwithin the S/F (because they could be performed within a year)

c. Transfers of interest in land(real estate) of a term more than 1 year

(i) Includes easements, leases,& sales of real estate

(ii) NOTE: 1 year does NOT fallwithin S/F – has to be more than a year

d. Promise by executor oradministrator to pay obligation of estate from his own funds

e. Sale of goods for $500 or more – whether merchant or not isirrelevant

(i) Anytime the question mentionssales price, it』s probably a S/F issue

(ii) EXCEPTIONS – SWAP (i) Specially manufactured goods, (ii) Written confirmation of an oral agreement between merchants,(iii) Admission in apleadings or court that a K for goods existed, or (iv) Partial payment or delivery made & accepted

(iii) Leases of Goods with paymentstotaling 1K or more – add all months』 lease $

f. To act as Surety(promise to 「answer for」 the debt of another)

(i) 「Answer for」 is limited to guarantees – not merely a promise to pay, but rather a promise to pay if someone else doesn』t (e.g. co-signing on a carloan)

(ii) 「Main purpose」 Exception – if guaranteeing the loan will benefit the promisor, the guaranteeis outside the S/F & therefore need not be in writing

3. Statute of Frauds Defense – (i) agreement within S/F, AND(ii) S/F not satisfies

- Need more than oral testimony

4. Satisfying Statute of Frauds WITHOUT writing

a. Services K – full performance

(i) Full performance by either partysatisfies the S/F,

(ii) BUT part performancedoesn』t satisfy S/F (e.g., fired after 1 year under 3 year oral agreement)

(a) S/F is NOT satisfied (no K) – Pcannot recover under K law, because D has S/F defense

(b) BUT, because this may beunfair, she might recover under the law of Quasi-K

b. Real estate transfer K – payment & real estate

(i) Part performance by buyer of real estate CAN satisfy the S/F

- Buyer must do 2 of 3 following– (1) part payment; (2) possession; (3) buyer』s improvements

(ii) Payment alone does NOT satisfy the S/F – even full payment

(iii) Buyer can only enforce K inequity by demanding specific performance to compel Seller to fulfill hisobligation precisely as set forth in K (can』t sue for damages)

c. Sale of Goods K

(i) Ordinary goods – part performance satisfies S/F but only extent of partperformance

(a) Delivered Goods – S/F satisfied

(b) Undelivered goods – S/F NOT satisfied

(ii) Specially manufactured goodsexception – S/F is satisfied as soon as sellermakes a 「substantial beginning」 of making or obtaining the specially manufacturedgoods

d. Judicial Admission (sale ofgoods agreement) – statement in (i) pleadings, (ii)testimony, or (iii) discovery that there was a deal (「yes, we agreed but wedidn』t put it in writing」)

5. Satisfying Statute of Frauds WITH writing:

a. Common Law K (services, realestates, guarantee) – look at:

(i) Contents of the writing – 「all materialterms」(who & what), AND

(ii) Signed by person against whom (defendant) the agreement is being enforced

b. UCC (Sale of Goods)

(i) Contents of the writing – 「all materialterms」(who & what), AND

(ii) Signed by person against whom (defendant) the agreement is being enforced

(iii) Quantity – must be contained in the writing

- NOTE: Merchant Confirmatory Memo Rule between merchants

(a) If one party, within reasonabletime after oral understanding, sends a signed written confirmation and otherparty fails to respond – this will satisfy S/F

(b) Unless, other party objectswithin 10 days

- it must evidence a contract forthe sale of goods;

- it must be "signed"(any authentication which identifies the party to be charged such as aletterhead or even an email); and

- it must specify a quantity(which need not be accurately stated but recovery is limited to the amount stated).

c. UCC 2A (Leases of personal property)– this is one place Art. 2A different from Art. 2

- Writing must – (1) indicateit』s a lease; (2) describe what is leased; (3) duration; & (4) payment

6. Related issues:

a. K Modification:

(i) Law requires a writing tomodify (determined by whether deal with allegedchange is within S/F)

(a) If allegedly modified K iswithin S/F – must be in writing

(b) If not within S/F – no writingrequirement

(ii) K requires a writing tomodify:

(a) Common law – K provisions requiring that all modifications be in writing are ignored

(b) UCC – K provisions requiring written modifications are effective(unless waived)

b. Written authority to signReal Estate agreement for another (Equal Dignity Rule)

(i) Underlying agreement is within S/F – need written authorization

(ii) Underlying agreement NOT within S/F – NO need for written authorization