PER and Interpretation

Wednesday, May 05, 2010

2:00 PM

• Parol Evidence Rule

○ What is the party trying to admit?
 Extrinsic evidence that adds to the written contract
○ Is the agreement integrated?
 Integrated if writing adopted by parties as a final expression of one or more terms of
an agreement
□ Integrated - move on to next step
□ Not integrated - rule doesn’t apply, no contract
○ Is the agreement partially or completely integrated?
 Completely
□ Parol evidence rule bars all extrinsic evidence
 Partially
□ Complete terms
 Parol evidence rule bars all extrinsic evidence
□ Incomplete or missing terms
 PER allows extrinsic evidence that supplements terms
 PER bars extrinsic evidence that contradicts or varies terms
○ How do we determine partial vs complete integration?
 Appearance/4 corners test
□ Judge only looks at the appearance of the contract to determine status
 Actual intent Restatement 209 test
□ Writing deemed to be an integration only if parties actually intended it to be an
integration
□ Will consider any relevant evidence to determine parties' intent
□ Special cases where agreement not completely integrated
 Omitted supplemental term was agreed to for separate consideration
 Omitted supplemental term might naturally by omitted from writing
 Merger clause
□ Contract is complete
○ Modification
 Modifications made after K is signed is not subject to PER
 Requires separate consideration
○ Fraud, duress, mistake
 Extrinsic evidence always admissible
• Interpretation
○ What is party trying to admit?
 Extrinsic evidence that explains language already in the contract
○ Is the language ambiguous?
 No
□ Evidence not admitted
 Yes
□ Evidence admitted and court determines meaning of the language
○ How do we determine what is ambiguous?
 NY/plain meaning/4 corners approach
□ Judge only looks at the contract to determine if a term could be interpreted in
more than one way
□ No extrinsic evidence is allowed
□ UCC exception

Outline Page 1
 □ UCC exception
 In contracts for sale of goods judge must always consider course of
dealings, course of performance, and trade usage to determine ambiguity
 CA approach
□ Judge allowed to consider all extrinsic evidence in order to determine whether
the language is ambiguous
○ If the term is ambiguous, how does the court decide it's meaning?
 Objective evidence
□ Express terms
□ Course of performance
□ Course of dealing
□ Trade usage
 Parties' beliefs
□ Situations that definitively decide the meaning
 Parties attach same meaning to a term
◊ K formed and that meaning applied
 Parties attach different meanings
◊ P1 did not know (or had no reason to know) of any different
meaning and P2 knew (or should have known) that P1 attached that
meaning
► P1s meaning attached
◊ Neither parties know of other's interpretation of term
► No meeting of the minds - no K
◊ Both parties know of other's interpretation
► Use objective evidence to determine which is most reasonable

Outline Page 2