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Alaska Pacific Trading company v. Eagon Forest Products, Inc.

(pg 657) Facts: The log purchaser and log seller entered into a contract to buy and sell raw logs. After months of communications between the parties, the delivery date passed with no shipment. The purchaser canceled the contract, alleging that the seller had breached. The seller brought an action for breach. The trial court awarded summary judgment to the purchaser, finding that the seller breached the contract by failing to timely deliver the logs. Issue: Was the failure to timely deliver the goods a material breach? Holding and Decision: Yes. On appeal, the court found that under the "perfect tender" rule, the seller breached its duty under the contract and released the purchaser from its duty to accept the logs. The seller did not dispute that the contract specified a date for shipment or that the logs were not shipped by that date. The court further found that even if the parties did waive the original delivery date, the seller still had a duty to deliver the logs within a reasonable time. Its failure to ship the logs for an additional 20 days, while the price of logs continued to drop, was unreasonable and a breach. Rule of Law: Under the perfect tender rule of the UCC II, delivery failure in any respect to conform to the contract means the seller has breached and the buyer is released from duty to accept the goods. This was a material breach. Analysis: Under common law, in contract such as service contracts only a breach by one of the parties to the contract excuses performance of the other party to the contract and only if the breach is a material breach.

Pg. 449 Rogers v. Jackson (ME, 2002) promissory note, ability to pay oral, integration, contradiction, -wasnt supposed to read Facts: On 12/21, 1994 Jackson signed and delivered to the Rogers a promissory note in which he promised to pay them $3000 plus 7% interest with half the principal payable in one year and the remaining principal and interest payable in two years. Jackson did not pay any of the amount due under the note. He claimed he was only required to pay if able and he was not able as part of a larger oral argument when he did not foreclose on Rogers. SJ was granted for Rogers. Issue: Was the oral condition of ability to pay barred by parol evidence rule? (Was the contract fully integrated? Was the oral condition consistent with the writing? No, no, yes Holding and Decision: The state supreme court held that the borrower's statement of material facts was not procedurally defective under Me. R. Civ. P. 56(h)(2). It complied with the parol evidence rule, as the agreement was only partially integrated. The agreement imposed no contractual duties on the lenders. The existence of the oral condition was, thus, a question of fact. Finally, Article 3 of the Uniform Commercial Code

applied, as it was a negotiable instrument that was conditionally delivered and was supplemented by a separate agreement, pursuant Reversed. Rule of Law: Where the oral condition supplements but does not contradict the writing, proof of it is not barred by the parol evidence rule. (Here it was not repugnant to terms of the note) Where parties to a written agreement agree orally that performance of the agreement is subject to a occurrence of a stated condition, the agreement is not integrated with respect to the oral condition and the parol evidence rule is inapplicable. As a general rule, parol evidence of additional terms is admissible to supplement a partially integrated written agreement if the additional terms are consistent with the writing. This rule applies to proof of oral conditions. Dissent: A promissory note is a contract. Look to parties intent and when in writing, extrinsic evidence may only be considered in limited circumstances (ambiguity in writing). If it is unambiguous, it is a question of law. A writing is integrated if it represents the final expression of any terms of an agreement (parol evidence can be used to show this, but if it is integrated cannot use parol evidence). If there is a supplemental term not contained in the writing, the agreement is only partially integrated and extrinsic evidence can be offered to support existence of supplemental term if it does not contradict the written terms. The promissory note is unambiguous and is at least partially integrated agreement. Thus parol evidence rule limits introduction of supplemental term which contradicts written terms (says he did not have to pay but writing says how much,when, how). Analysis: Parol evidence risks opening contracts to savvy drafters. Pg. 462 (CISG has no parol evidence rule) MCC-Marble v. Ceramica (11th Circ. 1998) Italian tile, subjective intent, CISG no PE rule Not on syllabus Facts: MCC is a Florida corporation engaged in the sale of tiles. Ceramica is an Italian corporation engaged in the manufacture of ceramic tiles. In October 1990, MCC met with Ceramica and negotiated an agreement to purchase tiles based on samples that were examined at a trade fair. An oral agreement was arrived at for price, quality, quantity, delivery and payment. The parties then recorded this agreement on Ceramicas standard printed order forms. The person who signed the contract on MCCs behalf neither spoke nor read Italian. MCC also claims that it entered into a requirements contract in February 1991 in which Ceramica agreed to supply a high grade tile at discount as long as MCC agreed to purchase sufficient quantities. MCC completed a number of order forms requesting tile deliveries pursuant to that agreement. MCC sued Ceramica claiming breach of contract in February 1992. Ceramica claimed there was no obligation to fill the orders because MCC had defaulted on payment terms for previous shipments. Ceramica relied on its preprinted forms. Those forms were printed in Italian and contained terms and conditions on the front and back. The English translation of the forms gave Ceramica the right to suspend or cancel the contract and other contracts upon default in payment and MCC had no right to indemnification or damages.

Ceramica counterclaimed against MCC seeking damages for nonpayment of deliveries. MCC claimed that the tile it had not paid for was of a lower quality and pursuant to CISG it was entitled to reduce payment in proportion to the defects. Ceramica defended this claim by pointing to the contract which called for complaints to be made in writing by certified letter within 10 days of receipt of the merchandise. The physical evidence supported MCCs quality claims but the company never submitted any written complaints to the defendant. MCC argued before the court that the parties never intended the terms and conditions on the reverse side of the order form claiming that Ceramica was aware of such intent. Affidavits of Ceramicas representatives and MCCs employee at the trade show supported MCCs evidence in this regard. The trial court awarded Ceramica summary judgment based on parol evidence and MCC appealed. Issue: 1. Does the parol evidence rule apply to CISG contracts? 2. Is the fact that a person signs a contract in a commercial transaction knowing he is ignorant of its terms an act that will excuse a party from obligation to perform the terms of that contract? Holding and Decision: 1. No. The parol evidence rule does not apply to CISG contracts. 2. No. The fact that a person signs a contract in a commercial transaction knowing he is ignorant of its terms is not an act that will excuse a party from obligation to perform the terms of that contract. The parties agree that the CISG governs this dispute. MCC contends that the judge improperly disregarded the subjective intentions of the parties in awarding summary judgment and that it was error to apply the parol evidence rule in derogation of the CISG. CISG instructs courts to consider the subjective intentions of the parties as long as the other party knew or could not have been unaware of that intent. This requires an inquiry into subjective intent. MCC submitted three affidavits that discussed the subjective intent of the parties. All three affidavits state that MCC and Ceramica never intended to be bound by the terms on the reverse side of the form despite provisions directly below the signature line that expressly and specifically incorporated those terms. There is no doubt that if those terms applied to this contract the magistrates report and recommendation would be upheld. CISG requires courts to consider the subjective intent of the parties while interpreting the conduct of the parties and requires the court to consider MCCs evidence at is interprets the parties conduct. We next consider the parol evidence rule in application to CISG contracts. CISG has no statute of frauds provision and expressly allows enforcement of oral contracts. The court will consider parol evidence regarding the negotiations to the extent they reveal the parties subjective intent. Courts applying CISG cannot upset the parties reliance on that agreement by substituting familiar principles of domestic law when the Convention requires a different choice. Undisclosed subjective intentions are immaterial in a commercial transaction especially when contradicted by objective conduct. This is not to say that parties to an international contract for the sale of goods cannot depend on written contracts or that parol evidence regarding subjective contractual intent need always prevent a party relying on a written agreement from securing summary judgment. To the contrary, most cases will not present a situation (as exists in this case) in which both parties

to the contract acknowledge a subjective intent not to be bound by the terms of a preprinted writing. In most cases objective evidence will provide the basis for the courts decision. If the parties wish to avoid parol evidence problems they need only include a merger clause. MCC wins. Rule of Law: Analysis: CISG requires courts to consider evidence of a partys subjective intent when signing a contract if the other party of the contract was aware of that intent at the time.