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Contracts - Interpretation


undefined, object
copy deck
What is the rule for various degrees of integration of parol evidence?
Not an Integration: can Explain the writing.
Partial Integration: can Explain and Supplement the writing.
Complete Integration: can Explain, Supplement, and Contradict the writing.
What are the two questions to be asked in order to classify agreements by the admissability of Parol Evidence?
First, is the writing an integration? It's an integration if it's FINAL.

If so, is the writing a complete or partial integration? There are four tests used to answer this question.
What are the tests for determining if a writing is a complete or partial integration? What governs?
Conservative Tests:
Wigmore: Writing is a complete integration if the PE "deals at all" with the subject matter of the writing.
Williston (MAJORITY): Writing is a complete integration if the PE "normally and naturally" would have been included in the writing.

Liberal Tests:
UCC 2-202 (MAJORITY, for goods): Writing is a complete integration only if reasonable parties would "certainly" have included the PE in the writing.
Corbin: Parties intended to include the subject of the PE. Court is given discretion to consider all evidence "logically relevant."
What are the policy justifications for liberal and conservative tests for judging whether a writing is a complete integration?
Liberal: Honor the intention of the parties.
Conservative: Preserve the integrity of the writing.
What is the significance of a merger clause to a writing?
They are so common that they are not dispositive w.r.t. excluding Parol Evidence. The absence of a merger clauses, however, is strong evidence that the writing is not a complete integration, or perhaps not an integration at all.
What is the definition of an Integration?
(the terms illuminate the "exceptions" to the PE rule.)
A writing embodying a single, valid, enforceable contract and thereby superseding prior and contemporaneous parol terms.

Collateral Agreement
Consistent Oral Conditions Precedent
Proof of facs triggering Enforceability Doctrine
Subsequent Oral Modification
What are the requirements for an Incorporation by Reference?
"A clear reference to a document, custom, or practice that manifests an intent to include the referent." (a passing mention is no good)
What are the three classes of Incorporation by Implication?
1) Implied-in-fact, based on actual intent of the parties
2) Implied-in-fact, based on interpretive intent
3) Implied-in-law
What are the elements of an Incorporation, Implied-in-Fact, based on the actual intent of the parties?
The excluded terms must have been so clearly assumed in the minds of the parties that they were not included in the writing. Must be proven by a preponderance of the evidence.
What are the elements of an Incorporation Implied-in-Fact based on the interpretive intent of the parties?
1) an unforeseen development occurs (subjective)
2) impact of the unforeseeable event makes the implication necessary to avoid a grossly unfair deal.
3) reasonable contracting parties would have incorporated the meaning in question had they foreseen the development (objective)
What are the elements of an incorporation Implied-in-Law?
Judge's discretion: should it be let in?
UCC-like gap fillers are allowed to effectuate some public policy.
- prior actions in this deal
- prior sequence of acts in other contracts
- trade usage
Cannot imply anything that contradicts the language of the written agreement.
Once the text to be interpreted is settled, what are the four steps of the actual interpretation?
1) Identify the Possible Meanings of the Language
2) Characterize Each Meaning by Type of Usage
3) Choose one of the Meanings
4) Construe the Term
What are the four theories for when extrinsic material may be taken into account in evaluating the meaning of a term?
Objective Theory
1) text and context
2) if no plain meaning, then extrinsic

Modified Objective Theory
1) text, context, and trade custom
2) if no plain meaning, then extrinsic

UCC 2-202
1) text, context, trade custom, course of dealings of the parties, course of performance of the parties
2) if no plain meaning, then extrinsic

Subjective Theory
All meanings considered: text, contenxt, and extrinsic evidence: "any evidence which demonstrates a meaning to which the language is 'reasonably susceptible.'"
What are the types of usage, and when should each be used?
General or Popular Usage
- always appropriate

Limited or Trade Usage
- both parties are members of the trade
- one party was not a member of the trade, but knew of or had reason to know of the usage.
- SoA: "The trade usage must be understood by the vast majority of members of the trade" vs. "the trade usage must be understood universally by members of the trade."

Mutual Usage
- agreement contains a glossary
- parties had a common interpretation of the wording.

Individual Usage
- one party understands the text with a particular meaning. the other knows or has reason to know that the first understands the term in that way.
What are the primary methods for choosing among valid meanings of a contract term?
Primary: Standards of Usage
* Williston
1) Mutual, if contains a glossary
2) General
3) Limited
4) Mutual, if no glossary
5) Individual
* Corbin
1) Mutual
2) Limited
3) General
4) Individual
Secondary method for choosing amongst valid meanings: Canons of Construction (RDPWLACPEE)
- K must be reasonable
- Course of dealings of the parties
- Course of performance of the parties
- The contract should be evaluated as a whole
- The contract must be lawful
- All parts of the contract should be effective
- Contra Proferentum
- Public Interest
- Expressio Unius est Exclusio Alterius
- Esjudem Generis
How can one construe the term, once its meaning is established?
It can be:
- a mere recital of fact
- a condition
- a duty
- a promissory condition
What are the secondary methods for choosing among valid meanings of a contract term?
Secondary: Canons/Maxims of Interpretation
- Reasonable Interpretation
- Circumstances of Execution/Course of dealings of the parties
- Contract as a whole
- Lawful Interpretation
- All parts should be effective
- Contra Proferentum - Interpret against the draftsman
- Public Interest
- Subsequent Conduct/Course of Performance
- Expressio Unius Est Exclusio Alterius
- Esjudum Generis

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