Reading Materials - Classes 6, 7 and 8 - Drafting and Interpretation

INTRODUCTION TO
AMERICAN CONTRACT LAW
2019
READING MATERIALS FOR

CLASSES 6, 7 AND 8
Course lecturer: Lect. univ. dr. Raluca Papadima, Esq.

Assistant Professor, University of Bucharest
Dr. Raluca Papadima, Esq. is a member of the

Bucharest, Paris and New York Bar.
Ms. Papadima graduated from the Faculty of

Law of the University of Bucharest and the
Collège Juridique Franco-Roumain (2003)
and holds a master in Business Law from the
University of Paris 2 Panthéon-Assas (2004),
a master in Corporate Law and Governance
from Harvard University (2006) and a PhD
from the University of Paris 2 Panthéon-
Assas and the University of Bucharest (2017).
Ms. Papadima is an Assistant Professor at the

Faculty of Law of the University of Bucharest
and the Collège Juridique Franco-Roumain,
where she teaches Romanian, French and
American Business Law and Contract Law.
Ms. Papadima worked as an attorney

specialized in Mergers & Acquisitions at
Linklaters LLP (Bucharest and Paris),
Latham & Watkins LLP (New York) and
Greenberg Traurig LLP (New York).
TABLE OF CONTENTS
CHAPTER 1 : CONTRACT DRAFTING ............................................................................ 3
CHAPTER 2 : CONTRACT INTERPRETATION ............................................................. 6
I. General Rules of Contract Interpretation: Restatement (Second) of Contracts................ 7
II. Special Rules For Sales of Goods Between Merchants: Uniform Commercial Code .. 11
A. Sphere of application of Article 2 UCC .................................................................. 11
B. Contract formation and interpretation ..................................................................... 12
1. Statute of Frauds .............................................................................................. 12
2. Methods of Contract Formation and Battle of Forms ...................................... 13
C. Contract interpretation............................................................................................. 14
1. Parol Evidence ................................................................................................. 14
2. Course of Performance, Course of Dealing, and Usage of Trade .................... 15
3. Missing Terms ................................................................................................. 17
III. Special Rules for Sales of Goods Between Merchants: CISG ..................................... 18
A. Sphere of application of the CISG .......................................................................... 18
1. Application rationae personae ........................................................................ 18
2. Application rationae materiae ......................................................................... 19
B. Contract formation .................................................................................................. 19
C. Contract interpretation............................................................................................. 19
IV. Special Rules for International Commercial Contracts: UNIDROIT Principles ......... 20
V. Focus on the Contra Proferentem Rule ........................................................................ 23
VI. Focus on the Parol Evidence Rule and Merger Clauses .............................................. 24
A. Origins of the parol evidence rule ........................................................................... 24
B. Evolution of the parol evidence rule ....................................................................... 25
C. Simplification of the parol evidence rule under the UCC ....................................... 28
D. The parol evidence rule and the CISG .................................................................... 28
CHAPTER 3 : EXEMPLIFICATION ................................................................................. 31
I. Buildings blocks of corporate contracts ......................................................................... 31
II. Frigaliment Importing Co. v. BNS International Sales Corp. (1960) ........................... 37
III. MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino, S.P.A. (1998) .. 39
2
CHAPTER 1 : CONTRACT DRAFTING
Building blocks. There are 7 contract concepts which, when integrated, result in a contract.
These concepts are the foundation of every contract, the building blocks that, when properly
assembled, express the parties’ business deal. Each contract concept serves a different business
purpose and has different legal ramifications (in particular with respect to remedies).
 Representations and warranties
 Covenants and rights
 Conditions
 Discretionary authority
 Declarations
Plagiarism is a virtue. Start drafting from a form or a precedent that matches the transaction.
Ideally use several precedents. Never start with a negotiated agreement. If you only have
negotiated deals, use the early drafts that were prepared before the other side made comments.
In addition, try to control the draft. The drafter is in the best position to ensure that the issues
it needs to address are covered in the best manner possible for its client (but beware of the
contra proferentem rule). Keep in mind that sometimes it is not only what is in the draft that is
important but also what is not. In certain cases, it may however not be possible to control the
draft. In certain types of deals, it is customary for one party or the other to control the draft.
For example, financing agreements are generally drafted by the attorney representing the lender
and sale agreement by the attorney of the seller.
Ambiguity is your enemy. If a term can be interpreted in more than one way, it can become
the basis of the dispute. Do not use synonyms, drafting contracts is not fiction writing. If you
mean the same thing, use the same word. Use plain, easy to understand, language. Use short
sentences, if possible. Simplify as much as possible. For maximum clarity, use the active voice
(example: Seller shall give notice to the Buyer) instead of the passive voice (example: notice
shall be given to the Buyer). Use punctuation and pay attention to proper form and formatting.
The
Panda
eats
shoots
and
leaves
The
Panda
eats,
shoots,
and
leaves
3
Exercises. Find drafting errors (i.e. errors only with respect to the form, not the substance, of
the provisions) in the following clauses.
Clause 1: If by October 31, 2009, Contractor fails to deliver the construction certificate to
Owner, it shall give written notice to lessee of such failure.
Clause 2: The Borrower shall not create any Indebtedness and is in compliance with all of its
obligations under all of its other Debt, including any Liabilities the repayment of which is
expected to be made within 10 days.
Clause 3: Seller Shall indemnify Buyer for all damages, liabilities and expenses arising from
Seller’s Breach. Buyer Shall indemnify Seller of all damages and liabilities arising from
Buyer’s Breach.
Clause 4: It is hereby agreed among the parties hereto that upon the occurrence of each and
every failure by Borrower to comply and perform in all respects with the covenants, restrictions
and limitations set forth in Article 6 of this agreement, Lender shall have and be entitled to
exercise, and shall be deemed to have and be entitled to exercise, the right and privilege to
cause the termination and extinguishment of the Loan Commitments, provided, however, that
delivery of advance written notice of said termination and extinguishing be made to the
borrower.
Sales and Licensing Agreement and Standard Terms (p. 106-110 of the manual and also
reproduced below). Questions:
Question 1: Find as many drafting errors as you can.
Question 2: What changes would you make if you wanted to clarify beyond any doubt that the
CISG does not apply to either the Framework and Sales Agreement or the Sales and Licensing
Agreement?
Question 3: What changes would you make if you wanted to clarify beyond any doubt that the
Standard Terms and Conditions for Sale (revised in 2017) apply to the Sales and Licensing
Agreement?
Question 4: What changes would you make to clarify beyond any doubt that the Framework
and Sale Agreement governs the Sales and Licensing Agreement?
Question 5: Do you notice any problem with the way the Limitation of Liability clause
contained in the Standard Terms works?
Question 6: Do you notice any problems with Art. 45(1) of the Sales and Licensing Agreement?
Question 7: Do you notice any problems with Art. 45(2) of the Sales and Licensing Agreement?
4
Between
Innovative Cancer Treatment LLC, 46 Commerce Road, New York City, NY, United States
(Seller) and
Speranta Hospital, 1-3 Calea Victoriei, Bucharest, Romania (Buyer and together with Seller,
Parties)
Whereas the Buyer has previously purchased from the Seller a Proton Therapy Facility with two
treatment rooms using a passive scattering technique;
Whereas the Buyer wants to acquire an additional treatment room using active scanning technology;
Whereas testing is a crucial issue for the final approval of the active scanning technology and the
Buyer has access to the necessary data and facilities;
Whereas the general relationship between the Parties is governed by a Framework and Sales
Agreement.
Art. 1 Definitions
Agreement: Sales and Licensing Agreement concluded between the Parties
Active Scanning Technology: The equipment, materials and software necessary to use a magnet
guided and modeled proton beam for the treatment of cancer purchased by the Buyer from the Seller
as described in detail in Annex 1 to this contract
Art. 2 Purchase
The Parties agree that the Seller will sell and the Buyer will purchase a third treatment room using
active scanning technology for its existing Proton Treatment Facility. The scope of delivery, as
defined in detail in Annex 1 to the Agreement, includes equipment and materials as well as the right
to the permanent use of the necessary software. No royalties are payable by the buyer in regard to
the use of the software for 30 years.
Art. 3 Price
(1) The purchase price for the goods and services listed in Annex 1 is USD 3,500,000. It takes into
account a discount of USD 6 million for the Buyer’s contribution in developing and testing the
active scanning technology, in particular the software.
(2) The Buyer undertakes to pay USD 2 million 10 business days after Seller has made the third
treatment room fully operational and available to the Buyer and USD 1.5 million 180 days after the
first payment.
Art. 4 Development
(1) The Seller is responsible for the development of the active scanning technology (additional parts
and software). The Buyer is responsible for providing the Seller with the necessary medical data for
the fine-tuning of the active scanning technology and for testing it.
(2) The Buyer will conduct the necessary clinical trials as required by the Medical Certification
Authority. The Buyer is responsible for obtaining any ethical approvals and patient consents
required by the laws of Romania.
(3) The Parties agree that the Seller holds and will continue to hold all intellectual property rights in
the active scanning technology, including the software.
(4) The Seller has the right to sell the active scanning technology, including the software, under its
name and for its own account.
Art. 44 Dispute Resolution

(1) The Parties hereby agree that for interim and provisional urgent measures application may be
made to the courts of New York or Bucharest as applicable.
(2) In addition, both Parties will have the right to bring any and all claims in the courts of New York
or Bucharest to the jurisdiction of which they hereby submit.
Art. 45 Final Provisions

(1) The Parties hereby agree that (a) no consent, approval, order or authorization from any
governmental authority or third party is required in connection with the execution of this Agreement
and the consummation of the transactions contemplated hereunder and (b) the execution of this
Agreement and the consummation of the transactions contemplated hereunder do not and will not
5
conflict with or result in any violation of any state, rule, regulation, order or other legal requirement of
any governmental authority.
(2) As of the date hereof, there is no pending or, to the knowledge of the Parties, threatened
litigation against any of the Parties.
Art. 46 Standard Terms

This Agreement is subject to the Seller’s Standard Terms and Conditions for Sale.
_________________ __________________
www.ictproton.us
Innovative Cancer Treatment Ltd.
Standard Terms and Conditions for Sale
(1 January 2017)
Section 1 Cooperation between Parties

The Parties undertake to conduct themselves and to fulfill their obligations in good faith.
Section 2 Limitation of Liability

To the fullest extent permitted by law, and notwithstanding any other provision in this agreement,
the Buyer agrees that the total liability, in the aggregate, of the Seller and the Sellers’s officers,
directors and employees, to the Buyer for any and all claims, losses, costs, expenses or damages,
including attorneys’ fees, incurred by the Buyer and resulting from or in any way related to the
Agreement shall not exceed the purchase price or USD 10 million, whichever is greater. It is
intended that this limitation will apply regardless of the cause of action or legal theory pled or
asserted, however alleged or arising, unless otherwise prohibited by law.
Section 21 Dispute Resolution

(1) Any dispute arising out of or in connection with this Agreement will be finally settled under the
Arbitration Rules of CEPANI – The Belgian Centre for Arbitration and Mediation by one or more
arbitrators appointed in accordance with the said Rules.
(2) The place of the arbitration will be New York City, NY, United States.
(3) The arbitration will be conducted in English.
Section 22 Choice of Law

The contract is governed by the law of the United States.
CHAPTER 2 : CONTRACT INTERPRETATION

Many disputes concern the correct interpretation of a contract in both oral and written forms.
Even detailed written contracts can have terms that are ambiguous, often because of unforeseen
circumstances. In some cases, there may be no question that a contract exists and there may be
many detailed provisions over which the parties have no doubt, but a dispute may arise because
of an event neither party anticipated when entering into the contract.
There is much contract case law that provides rules for the interpretation of contracts. Courts
attempting to resolve all types of disputes have developed these contract interpretation rules
over centuries. Some of these rules of interpretation are reflected by the Restatement (Second)
of Contracts. Most of this case law applies to the interpretation of any type of contract,
including Article 2 UCC contracts (sales of goods between merchants).
General rules of contract interpretation (also applicable under Article 2 of the UCC):
 Contracts should be read in the entirety, no words should be disregarded if possible. Winn
v. Aleda Const. Co., 227 Va. 304, 307, 315 S.E.2d 193 (1984).
 In construing a contract, effect must be given to each provision, if possible, giving the entire
contract a harmonious construction. Carpenter v. Town of Gate City, 185 Va. 734, 740, 40
S.E.2d 268 (1946).
6
 When an agreement is plain and unambiguous in its terms, it will be given full effect.
Gordonsville Energy v. Virginia Elec. & Power Co., 257 Va. 344, 354, 512 S.E.2d 811, 817
(1999) (reiterating that “when contract terms are clear and unambiguous, the words used by
the parties must be given their plain and ordinary meaning”); McLean House v. Maichak,
231 Va. 347, 349, 344 S.E.2d 889, 890 (1986).
The guidepost in determining the legal responsibilities of the parties is the contract itself. The
contract, unless it is illegal or violates public policy, constitutes the law that governs the parties’
relationship. McDevitt & Street Co. v. Marriott Corp., 713 F. Supp 906, 914 (E.D. Va 1989),
aff’d in part and rev’d in part 911 F.2d 723 (4th Cir. 1990); Bob Grissett Golf Shoppes, Inc. v.
Confidence Golf Co., 44 B.R. 156, 159 (Bankr.E.D.Va.1984); Russell County v. Carroll, 194
Va. 699, 703, 74 S.E.2d 685, 687-88 (1953). Where sophisticated business professionals enter
into an arms-length transaction, the court will enforce the terms of the agreement between them
absent some compelling reason that enforcement would be unreasonable or unjust. M/S Bremen
v. Zapata Off-Shore Co., 407 U.S. 1, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972).
I. General Rules of Contract Interpretation: Restatement (Second) of Contracts
Chapter 9 (The Scope of Contractual Obligations)
§ 201. Whose Meaning Prevails

(1) Where the parties have attached the same meaning to a promise or agreement or a term
thereof, it is interpreted in accordance with that meaning.
(2) Where the parties have attached different meanings to a promise or agreement or a term
thereof, it is interpreted in accordance with the meaning attached by one of them if at the time
the agreement was made (a) that party did not know of any different meaning attached by the
other, and the other knew the meaning attached by the first party; or (b) that party had no reason
to know of any different meaning attached by the other, and the other had reason to know the
meaning attached by the first party.
(3) Except as stated in this Section, neither party is bound by the meaning attached by the other,
even though the result may be a failure of mutual assent.
§ 202. Rules in Aid of Interpretation

(1) Words and other conduct are interpreted in the light of all the circumstances, and if the
principal purpose of the parties is ascertainable it is given great weight.
(2) A writing is interpreted as a whole, and all writings that are part of the same transaction are
interpreted together.
(3) Unless a different intention is manifested, (a) where language has a generally prevailing
meaning, it is interpreted in accordance with that meaning; (b) technical terms and words of art
are given their technical meaning when used in a transaction within their technical field.
(4) Where an agreement involves repeated occasions for performance by either party with
knowledge of the nature of the performance and opportunity for objection to it by the other,
any course of performance accepted or acquiesced in without objection is given great weight
in the interpretation of the agreement.
(5) Wherever reasonable, the manifestations of intention of the parties to a promise or
agreement are interpreted as consistent with each other and with any relevant course of
performance, course of dealing, or usage of trade.
§ 203. Standards of Preference in Interpretation

In the interpretation of a promise or agreement or a term thereof, the following standards of
preference are generally applicable: (a) an interpretation which gives a reasonable, lawful, and
effective meaning to all the terms is preferred to an interpretation which leaves a part
unreasonable, unlawful, or of no effect; (b) express terms are given greater weight than course
of performance, course of dealing, and usage of trade, course of performance is given greater
7
weight than course of dealing or usage of trade, and course of dealing is given greater weight
than usage of trade; (c) specific terms and exact terms are given greater weight than general
language; (d) separately negotiated or added terms are given greater weight than standardized
terms or other terms not separately negotiated.
§ 204. Supplying an Omitted Essential Term

When the parties to a bargain sufficiently defined to be a contract have not agreed with respect
to a term which is essential to a determination of their rights and duties, a term which is
reasonable in the circumstances is supplied by the court.
§ 205. Duty of Good Faith and Fair Dealing

Every contract imposes upon each party a duty of good faith and fair dealing in its performance
and its enforcement.
§ 206. Interpretation Against the Draftsman

In choosing among the reasonable meanings of a promise or agreement or a term thereof, that
meaning is generally preferred which operates against the party who supplies the words or from
whom a writing otherwise proceeds.
§ 208. Unconscionable Contract or Term

If a contract or term thereof is unconscionable at the time the contract is made a court may
refuse to enforce the contract, or may enforce the remainder of the contract without the
unconscionable term, or may so limit the application of any unconscionable term as to avoid
any unconscionable result.
§ 209. Integrated Agreements

(1) An integrated agreement is a writing or writings constituting a final expression of one or
more terms of an agreement.
(2) Whether there is an integrated agreement is to be determined by the court as a question
preliminary to determination of a question of interpretation or to application of the parol
evidence rule.
(3) Where the parties reduce an agreement to a writing which in view of its completeness and
specificity reasonably appears to be a complete agreement, it is taken to be an integrated
agreement unless it is established by other evidence that the writing did not constitute a final
expression.
§ 210. Completely and Partially Integrated Agreements

(1) A completely integrated agreement is an integrated agreement adopted by the parties as a
complete and exclusive statement of the terms of the agreement.
(2) A partially integrated agreement is an integrated agreement other than a completely
integrated agreement.
(3) Whether an agreement is completely or partially integrated is to be determined by the court
as a question preliminary to determination of a question of interpretation or to application of
the parol evidence rule.
§ 211. Standardized Agreements

(1) Except as stated in Subsection (3), where a party to an agreement signs or otherwise
manifests assent to a writing and has reason to believe that like writings are regularly used to
embody terms of agreements of the same type, he adopts the writing as an integrated agreement
with respect to the terms included in the writing.
(2) Such a writing is interpreted wherever reasonable as treating alike all those similarly
situated, without regard to their knowledge or understanding of the standard terms of the
writing.
8
(3) Where the other party has reason to believe that the party manifesting such assent would
not do so if he knew that the writing contained a particular term, the term is not part of the
agreement.
§ 213. Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule)

(1) A binding integrated agreement discharges prior agreements to the extent that it is
inconsistent with them.
(2) A binding completely integrated agreement discharges prior agreements to the extent that
they are within its scope.
(3) An integrated agreement that is not binding or that is voidable and avoided does not
discharge a prior agreement. But an integrated agreement, even though not binding, may be
effective to render inoperative a term which would have been part of the agreement if it had
not been integrated.
§ 214. Evidence of Prior or Contemporaneous Agreements and Negotiations

Agreements and negotiations prior to or contemporaneous with the adoption of a writing are
admissible in evidence to establish (a) that the writing is or is not an integrated agreement; (b)
that the integrated agreement, if any, is completely or partially integrated; (c) the meaning of
the writing, whether or not integrated; (d) illegality, fraud, duress, mistake, lack of
consideration, or other invalidating cause; (e) ground for granting or denying rescission,
reformation, specific performance, or other remedy.
§ 215. Contradiction of Integrated Terms

Except as stated in the preceding Section, where there is a binding agreement, either completely
or partially integrated, evidence of prior or contemporaneous agreements or negotiations is not
admissible in evidence to contradict a term of the writing.
§ 216. Consistent Additional Terms

(1) Evidence of a consistent additional term is admissible to supplement an integrated
agreement unless the court finds that the agreement was completely integrated.
(2) An agreement is not completely integrated if the writing omits a consistent additional
agreed term which is (a) agreed to for separate consideration, or (b) such a term as in the
circumstances might naturally be omitted from the writing.
§ 217. Integrated Agreement Subject to Oral Requirement of a Condition

Where the parties to a written agreement agree orally that performance of the agreement is
subject to the occurrence of a stated condition, the agreement is not integrated with respect to
the oral condition.
§ 220. Usage Relevant to Interpretation

(1) An agreement is interpreted in accordance with a relevant usage if each party knew or had
reason to know of the usage and neither party knew or had reason to know that the meaning
attached by the other was inconsistent with the usage.
(2) When the meaning attached by one party accorded with a relevant usage and the other knew
or had reason to know of the usage, the other is treated as having known or had reason to know
the meaning attached by the first party.
§ 221. Usage Supplementing an Agreement

An agreement is supplemented or qualified by a reasonable usage with respect to agreements
of the same type if each party knows or has reason to know of the usage and neither party
knows or has reason to know that the other party has an intention inconsistent with the usage.
9
§ 222. Usage of Trade
(1) A usage of trade is a usage having such regularity of observance in a place, vocation, or
trade as to justify an expectation that it will be observed with respect to a particular agreement.
It may include a system of rules regularly observed even though particular rules are changed
from time to time.
(2) The existence and scope of a usage of trade are to be determined as questions of fact. If a
usage is embodied in a written trade code or similar writing the interpretation of the writing is
to be determined by the court as a question of law.
(3) Unless otherwise agreed, a usage of trade in the vocation or trade in which the parties are
engaged or a usage of trade of which they know or have reason to know gives meaning to or
supplements or qualifies their agreement.
§ 223. Course of Dealing

(1) A course of dealing is a sequence of previous conduct between the parties to an agreement
which is fairly to be regarded as establishing a common basis of understanding for interpreting
their expressions and other conduct.
(2) Unless otherwise agreed, a course of dealing between the parties gives meaning to or
supplements or qualifies their agreement.
§ 224. Condition Defined

A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is
excused, before performance under a contract becomes due.
§ 225. Effects of the Non-Occurrence of a Condition

(1) Performance of a duty subject to a condition cannot become due unless the condition occurs
or its non-occurrence is excused.
(2) Unless it has been excused, the non-occurrence of a condition discharges the duty when the
condition can no longer occur.
(3) Non-occurrence of a condition is not a breach by a party unless he is under a duty that the
condition occur.
§ 226. How an Event May Be Made a Condition

An event may be made a condition either by the agreement of the parties or by a term supplied
by the court.
§ 227. Standards of Preference with Regard to Conditions

(1) In resolving doubts as to whether an event is made a condition of an obligor’s duty, and as
to the nature of such an event, an interpretation is preferred that will reduce the obligee’s risk
of forfeiture, unless the event is within the obligee’s control or the circumstances indicate that
he has assumed the risk.
(2) Unless the contract is of a type under which only one party generally undertakes duties,
when it is doubtful whether (a) a duty is imposed on an obligee that an event occur, or (b) the
event is made a condition of the obligor’s duty, or (c) the event is made a condition of the
obligor’s duty and a duty is imposed on the obligee that the event occur, the first interpretation
is preferred if the event is within the obligee’s control.
(3) In case of doubt, an interpretation under which an event is a condition of an obligor’s duty
is preferred over an interpretation under which the non-occurrence of the event is a ground for
discharge of that duty after it has become a duty to perform.
§ 228. Satisfaction of the Obligor as a Condition

When it is a condition of an obligor’s duty that he be satisfied with respect to the obligee’s
performance or with respect to something else, and it is practicable to determine whether a
reasonable person in the position of the obligor would be satisfied, an interpretation is preferred
10
under which the condition occurs if such a reasonable person in the position of the obligor
would be satisfied.
§ 229. Excuse of a Condition to Avoid Forfeiture

To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a
court may excuse the non-occurrence of that condition unless its occurrence was a material part
of the agreed exchange.
II. Special Rules For Sales of Goods Between Merchants: Uniform Commercial Code
The Uniform Commercial Code (UCC) is a set of default rules governing commercial
transactions, drafted jointly by the National Conference of Commissioners on Uniform State
Laws and the American Law Institute. The UCC was intended to assure uniformity of laws
across the various U.S. States. However, the UCC did not become law unless and until adopted
by the legislature of the specific State. U.S. States adopted certain UCC Articles with revisions
from the language contained in the UCC. Article 2 UCC (Sales) has been adopted by 49 of the
50 States, with Louisiana as the only exception. The UCC is comprised of various “Articles”,
each of which focuses on a different aspect of a commercial transaction, as follows:
 Article 1 General Provisions
 Article 2 Sales
 Article 2A Leases
 Article 3 Negotiable Instruments
 Article 4 Bank Deposits
 Article 4A Funds Transfers
 Article 5 Letters of Credit
 Article 6 Bulk Sales (obsolete)
 Article 7 Documents of Title
 Article 8 Investment Securities
 Article 9 Secured Transactions
A. Sphere of application of Article 2 UCC
Article 2 UCC is concerned with the sale of goods. As such, it applies as lex specialis instead
of the common law (which is derived from case law) or equity. Common law and equity
principles can supplement provisions of the UCC. However, they cannot be used to replace its
provisions, or the purposes and policies that those provisions reflect. This is unless a specific
provision of the UCC provides otherwise. If there is no such statutory provision allowing
common law or equity principles to act as to replace the UCC, the UCC preempts principles of
common law and equity that are inconsistent with either its provisions or its purposes and
policies. However, in practice, courts have often interpreted Article 2 UCC with the common
law in mind. This has caused interpretations of the UCC to diverge among the U.S. States.
Article 2 UCC applies to contracts for the sale of goods to or by a merchant.
“Merchant” is defined as “a person who deals in goods of the kind or otherwise by his
occupation holds himself out as having knowledge or skill peculiar to the transaction”. Article
2 UCC includes certain special rules that apply only to merchants or to agreements between
merchants, which generally hold merchants to a higher standard. The UCC does not apply to
the sale of goods between private parties. Also, the UCC does not apply to international
contracts for the sale of goods to the extent that the United Nations Convention on Contracts
for the International Sale of Goods (CISG) is applicable.
11
“Goods” are defined as “all things (including specially manufactured goods) which are
movable at the time of identification to the contract for sale” (UCC 2-105). A “sale” consists
of the passing of title from the seller to the buyer (UCC 2-106). Given the definition of goods,
Article 2 UCC address only sales of tangible items, and does not apply to contracts for services,
real property, leases, or transfers or licenses of intellectual property. In hybrid contracts
(contracts concerning a mix of goods and services) Article 2 UCC will generally apply when
the goods predominate. For example, in a contract for the sale of a major piece of capital
equipment that includes some ancillary installation services, the contract will typically be
viewed a s contract for the sale of goods. In addition, if the goods and services can be distinctly
severed, Article 2 UCC will generally be applied to the goods portion of the contract.
B. Contract formation and interpretation
1. Statute of Frauds
Article 2 UCC includes a “Statute of Frauds” rule. A contract for the sale of goods of $500 or
more requires a signed writing in order to be enforceable. There is no requirement for the
degree of formality. What is required is simply “some writing sufficient to indicate that a
contract for sale has been made” and “[a] writing is not insufficient because it omits or
incorrectly states a term agreed upon but the contract is not enforceable [...] beyond the quantity
of goods shown in such writing” (UCC 2-201(1)). There are exceptions to this requirement for
a signed writing (UCC 2-201(2) & (3)):
 A written confirmation between merchants (i.e., one merchant sends a written confirmation
of a contract to another merchant), which is not objected to within 10 days after it is received
 Contracts for specially manufactured goods not suitable for sale to others
 Contracts for which payment for the goods has been made and accepted
 Contracts for goods which have been received and accepted
 Admissions made in pleadings, testimony or otherwise in court
§ 2-201. Formal Requirements; Statute of Frauds
(1) Except as otherwise provided in this section a contract for the sale of goods for the price of
$500 or more is not enforceable by way of action or defense unless there is some writing
sufficient to indicate that a contract for sale has been made between the parties and signed by
the party against whom enforcement is sought or by his authorized agent or broker. A writing
is not insufficient because it omits or incorrectly states a term agreed upon but the contract is
not enforceable under this paragraph beyond the quantity of goods shown in such writing.
(2) Between merchants if within a reasonable time a writing in confirmation of the contract and
sufficient against the sender is received and the party receiving it has reason to know its
contents, it satisfies the requirements of subsection (1) against such party unless written notice
of objection to its contents is given within 10 days after it is received.
(3) A contract which does not satisfy the requirements of subsection (1) but which is valid in
other respects is enforceable
(a) if the goods are to be specially manufactured for the buyer and are not suitable for sale to
others in the ordinary course of the seller’s business and the seller, before notice of repudiation
is received and under circumstances which reasonably indicate that the goods are for the buyer,
has made either a substantial beginning of their manufacture or commitments for their
procurement; or
(b) if the party against whom enforcement is sought admits in his pleading, testimony or
otherwise in court that a contract for sale was made, but the contract is not enforceable under
this provision beyond the quantity of goods admitted; or
12
(c) with respect to goods for which payment has been made and accepted or which have been
received and accepted (Sec. 2-606).
2. Methods of Contract Formation and Battle of Forms
Methods of Contract Formation. Under Article 2 UCC, “[a] contract for sale of goods may
be made in any manner sufficient to show agreement, including conduct by both parties which
recognizes the existence of such a contract [...] even though the moment of its making is
undetermined [and] [e]ven though one or more terms are left open” (UCC 2-204). Contracts
for the sale of goods are typically made by offer and acceptance (mutual agreement to terms)
plus consideration. An offer may be accepted “in any manner and by any medium reasonable
under the circumstances”, including by beginning the requested performance (UCC 2-206).
Under general common law rules, offers are generally revocable and consideration is required
in order for an offer to be irrevocable (a “firm offer”). However, for sales of goods, an offer by
a merchant that gives assurances that it will be held open (“this is a firm offer” or “offer good
through 7/1/2017”) is not revocable for a reasonable time (if no time frame is given) or for the
time period stated, not exceeding 3 months (UCC 2-205).
Battle of Forms. Under general common law rules, if one party issues a form (such as a
purchase order) containing terms, and the other party responds with a form containing
additional or different terms (such as an acknowledgment), then the second form issued is
treated not as an acceptance, but as a counter-offer, because the acceptance differs from the
offer. If the parties proceed with the transaction, then the party that issued the second form
wins the “battle of the forms” and that party’s terms prevail.
Article 2 UCC overrides this general rule for the sale of goods: “A definite and seasonable
expression of acceptance of a written confirmation which is sent within a reasonable time
operates as an acceptance even though it states terms additional to or different from those
offered or agreed upon, unless acceptance is expressly made conditional on assent to the
additional or different terms” (UCC 2-207(1)). The different terms contained in the acceptance
are not included in the contract (they are “knocked-out”) and the additional terms “are to be
construed as proposals for addition to the contract” (UCC 2-207(2)). The additional terms
contained in the acceptance become part of the contract, unless (a) the offer expressly limits
acceptance to the terms of the offer, (b) the additional terms materially alter the offer or (c)
notification of objection to the additional terms has already been given or is given within a
reasonable time after notice of them is received. (UCC 2-207(2)).
§ 2-204. Formation in General
(1) A contract for sale of goods may be made in any manner sufficient to show agreement,
including conduct by both parties which recognizes the existence of such a contract.
(2) An agreement sufficient to constitute a contract for sale may be found even though the
moment of its making is undetermined.
(3) Even though one or more terms are left open a contract for sale does not fail for
indefiniteness if the parties have intended to make a contract and there is a reasonably certain
basis for giving an appropriate remedy.
§ 2-205. Firm Offers
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives
assurance that it will be held open is not revocable, for lack of consideration, during the time
13
stated or if no time is stated for a reasonable time, but in no event may such period of
irrevocability exceed three months; but any such term of assurance on a form supplied by the
offeree must be separately signed by the offeror.
§ 2-206. Offer and Acceptance in Formation of Contract
(1) Unless otherwise unambiguously indicated by the language or circumstances

(a) an offer to make a contract shall be construed as inviting acceptance in any manner and by
any medium reasonable in the circumstances;
(b) an order or other offer to buy goods for prompt or current shipment shall be construed as
inviting acceptance either by a prompt promise to ship or by the prompt or current shipment of
conforming or non-conforming goods, but such a shipment of non-conforming goods does not
constitute an acceptance if the seller seasonably notifies the buyer that the shipment is offered
only as an accommodation to the buyer.
(2) Where the beginning of a requested performance is a reasonable mode of acceptance an
offeror who is not notified of acceptance within a reasonable time may treat the offer as having
lapsed before acceptance.
§ 2-207. Additional Terms in Acceptance or Confirmation
(1) A definite and seasonable expression of acceptance or a written confirmation which is sent
within a reasonable time operates as an acceptance even though it states terms additional to or
different from those offered or agreed upon, unless acceptance is expressly made conditional
on assent to the additional or different terms.
(2) The additional terms are to be construed as proposals for addition to the contract. Between
merchants such terms become part of the contract unless:
(a) the offer expressly limits acceptance to the terms of the offer;
(b) they materially alter it; or
(c) notification of objection to them has already been given or is given within a reasonable time
after notice of them is received.
(3) Conduct by both parties which recognizes the existence of a contract is sufficient to
establish a contract for sale although the writings of the parties do not otherwise establish a
contract. In such case the terms of the particular contract consist of those terms on which the
writings of the parties agree, together with any supplementary terms incorporated under any
other provisions of this Act.
C. Contract interpretation
1. Parol Evidence
Article 2 UCC also includes a “Parol Evidence” rule which provides that terms set forth in a
writing that is intended by the parties as a complete and final expression of their agreement
(e.g., the agreement includes a “merger” or “entire agreement” provision) may not be
contradicted by evidence of a prior agreement or contemporaneous oral agreement, but may be
explained or supplemented by (UCC 2-202):
 Course of dealing (the actions of the parties under prior contracts)
 Usage of trade (the practices generally observed in a particular industry)
 Course of performance (the actions of the parties under this contract)
 Evidence of consistent additional terms (unless integrated agreement)
14
§ 2-202. Final Written Expression: Parol or Extrinsic Evidence
Terms with respect to which the confirmatory memoranda of the parties agree or which are
otherwise set forth in a writing intended by the parties as a final expression of their agreement
with respect to such terms as are included therein may not be contradicted by evidence of any
prior agreement or of a contemporaneous oral agreement but may be explained or
supplemented (a) by course of dealing or usage of trade (Section 1-303) or by course of
performance (Section 2-208); and (b) by evidence of consistent additional terms unless the
court finds the writing to have been intended also as a complete and exclusive statement of the
terms of the agreement.
2. Course of Performance, Course of Dealing, and Usage of Trade
Course of performance is a sequence of conduct between the parties to a particular transaction.

In other words, the course of performance is the way that the parties have performed throughout
the life of the contract. This can determine whether there have been modifications to a contract.
Examples are the prices charged on invoices, the manner of delivery and the time for payment.
Such course of performance can help a court determine what the terms of any contract are and
whether those terms have been modified. If a buyer consistently makes payment 60 to 90 days
after invoice for years, without objection, the seller may not later claim the buyer is in breach
of a credit agreement requiring payment within 30 days of invoice. It looks like the seller agreed
to modify the contract. Similarly, if a seller raises its prices and the buyer pays the higher prices
without objection for a long period of time, the buyer may not return to the lower written prices
in later litigation. Crane Company v. Progressive, 418 F.Supp. 662 (E.D.Va. 1976). The UCC
puts the burden on parties to object. If one party thinks that the other party is not performing
the contract, the first party should send a written objection. A party may decide not to enforce
all the terms of the contract and let the other party “get away with it”. However, that party
should nevertheless preserve its contract rights by sending a letter noting that deliveries are
consistently late, materials are not completely meeting specifications or payments are late.
Course of dealing is a sequence of conduct concerning previous transactions between the

parties to a particular transaction that is fairly to be regarded as establishing a common basis
of understanding for interpreting their expressions and other conduct.
Usage of trade is any practice or method of dealing having such regularity of observance in a
place, vocation, or trade as to justify an expectation that it will be observed with respect to the
transaction in question. The existence and scope of such a usage must be proved as facts.
Rules of interpretation. The UCC poses some principles and an exception (UCC 1-303)
 Express terms prevail over course of performance, course of dealing, and usage of trade
 Course of performance prevails over course of dealing and usage of trade
 Course of dealing prevails over usage of trade
 However, even if express terms normally prevail, a course of performance is relevant to
show a waiver or modification of any term inconsistent with the course of performance
(UCC 2-209).
§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade
(a) A “course of performance” is a sequence of conduct between the parties to a particular

transaction that exists if: (1) the agreement of the parties with respect to the transaction involves
repeated occasions for performance by a party; and (2) the other party, with knowledge of the
nature of the performance and opportunity for objection to it, accepts the performance or
acquiesces in it without objection.
15
(b) A “course of dealing” is a sequence of conduct concerning previous transactions between
the parties to a particular transaction that is fairly to be regarded as establishing a common
basis of understanding for interpreting their expressions and other conduct.
(c) A “usage of trade” is any practice or method of dealing having such regularity of observance
in a place, vocation, or trade as to justify an expectation that it will be observed with respect to
the transaction in question. The existence and scope of such a usage must be proved as facts.
If it is established that such a usage is embodied in a trade code or similar record, the
interpretation of the record is a question of law.
(d) A course of performance or course of dealing between the parties or usage of trade in the
vocation or trade in which they are engaged or of which they are or should be aware is relevant
in ascertaining the meaning of the parties’ agreement, may give particular meaning to specific
terms of the agreement, and may supplement or qualify the terms of the agreement. A usage of
trade applicable in the place in which part of the performance under the agreement is to occur
may be so utilized as to that part of the performance.
(e) Except as otherwise provided in subsection (f), the express terms of an agreement and any
applicable course of performance, course of dealing, or usage of trade must be construed
whenever reasonable as consistent with each other. If such a construction is unreasonable: (1)
express terms prevail over course of performance, course of dealing, and usage of trade; (2)
course of performance prevails over course of dealing and usage of trade; and (3) course of
dealing prevails over usage of trade.
(f) Subject to Section 2-209, a course of performance is relevant to show a waiver or

modification of any term inconsistent with the course of performance.
(g) Evidence of a relevant usage of trade offered by one party is not admissible unless that party
has given the other party notice that the court finds sufficient to prevent unfair surprise to the
other party.
§ 2-208. Course of Performance or Practical Construction
(1) Where the contract for sale involves repeated occasions for performance by either party
with knowledge of the nature of the performance and opportunity for objection to it by the
other, any course of performance accepted or acquiesced in without objection shall be relevant
to determine the meaning of the agreement.
(2) The express terms of the agreement and any such course of performance, as well as any
course of dealing and usage of trade, shall be construed whenever reasonable as consistent with
each other; but when such construction is unreasonable, express terms shall control course of
performance and course of performance shall control both course of dealing and usage of trade.
(3) Subject to the provisions of the next section on modification and waiver [§ 2-209], such
course of performance shall be relevant to show a waiver or modification of any term
inconsistent with such course of performance.
§ 2-209. Modification, Rescission and Waiver
(1) An agreement modifying a contract within this Article needs no consideration to be binding.
(2) A signed agreement which excludes modification or rescission except by a signed writing
cannot be otherwise modified or rescinded, but except as between merchants such a
requirement on a form supplied by the merchant must be separately signed by the other party.
16
(3) The requirements of the statute of frauds section of this Article [§ 2-201] must be satisfied
if the contract as modified is within its provisions.
(4) Although an attempt at modification or rescission does not satisfy the requirements of
subsection (2) or (3) it can operate as a waiver.
(5) A party who has made a waiver affecting an executory portion of the contract may retract
the waiver by reasonable notification received by the other party that strict performance will
be required of any term waived, unless the retraction would be unjust in view of a material
change of position in reliance on the waiver.
3. Missing Terms
Article 2 UCC contains certain “gap fillers” that will substitute for certain missing terms (i.e.
if the contract is silent on these matters):
 Price (the price is a “reasonable price at the time of delivery”, UCC 2-305)
 Quantity (the UCC does not substitute for missing quantity term but does recognize output
contracts (buyer will buy all of seller’s output) and requirements contracts (buyer will buy
all of its requirements from seller) as enforceable measures of quantity, UCC 2-306)
 Place of delivery (the place for delivery is the seller’s place of business, UCC 2-308)
 Time for delivery (the time for delivery is “a reasonable time”, UCC 2-309)
 Time and place for payment (payment is due at the time and place at which the buyer is to
receive the goods, even when the place of shipment is the place of delivery, UCC 2-310)
§ 2-305. Open Price Term
(1) The parties if they so intend can conclude a contract for sale even though the price is not
settled. In such a case the price is a reasonable price at the time for delivery if
(a) nothing is said as to price; or
(b) the price is left to be agreed by the parties and they fail to agree; or
(c) the price is to be fixed in terms of some agreed market or other standard as set or recorded
by a third person or agency and it is not so set or recorded.
(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed
through fault of one party the other may at his option treat the contract as cancelled or himself
fix a reasonable price.
(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and
it is not fixed or agreed there is no contract. In such a case the buyer must return any goods
already received or if unable so to do must pay their reasonable value at the time of delivery
and the seller must return any portion of the price paid on account.
§ 2-306. Output, Requirements and Exclusive Dealings
(1) A term which measures the quantity by the output of the seller or the requirements of the
buyer means such actual output or requirements as may occur in good faith, except that no
quantity unreasonably disproportionate to any stated estimate or in the absence of a stated
estimate to any normal or otherwise comparable prior output or requirements may be tendered
or demanded.
17
(2) A lawful agreement by either the seller or the buyer for exclusive dealing in the kind of
goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts
to supply the goods and by the buyer to use best efforts to promote their sale.
§ 2-307. Delivery in Single Lot or Several Lots
Unless otherwise agreed all goods called for by a contract for sale must be tendered in a single
delivery and payment is due only on such tender but where the circumstances give either party
the right to make or demand delivery in lots the price if it can be apportioned may be demanded
for each lot.
§ 2-308. Absence of Specified Place for Delivery
Unless otherwise agreed: (a) the place for delivery of goods is the seller’s place of business or if
he has none his residence; but (b) in a contract for sale of identified goods which to the
knowledge of the parties at the time of contracting are in some other place, that place is the
place for their delivery; and (c) documents of title may be delivered through customary banking
channels.
§ 2-309. Absence of Specific Time Provisions; Notice of Termination
(1) The time for shipment or delivery or any other action under a contract if not provided in
this Article or agreed upon shall be a reasonable time.
(2) Where the contract provides for successive performances but is indefinite in duration it is valid
for a reasonable time but unless otherwise agreed may be terminated at any time by either party.
(3) Termination of a contract by one party except on the happening of an agreed event requires
that reasonable notification be received by the other party and an agreement dispensing with
notification is invalid if its operation would be unconscionable.
III. Special Rules for Sales of Goods Between Merchants: CISG
The United Nations Convention on Contracts for the International Sale of Goods (CISG) is a
multilateral treaty governing transactions for the international sales of goods that implements
uniform sales law rules in the signatory states. The CISG was developed by UNCITRAL and
signed in Vienna in 1980. It replaced the less successful ULIS. The adoption of the CISG was
the culmination of several decades of efforts by states and international organizations to
respond to the needs of an ever-expanding international trade community by achieving a
worldwide unification of international sales law. The CISG was meant to simplify and do away
with the complexities, arcane provisions and technicalities of domestic sale laws and to provide
practical and predictable default rules that govern international sales transactions. The CISG’s
stated objective is to “contribute to the removal of legal barriers in international trade and
promote the development of international trade.” There are currently approximately 85
signatories, including the U.S. and Romania. Major holdouts (non-signatories): England, India.
A. Sphere of application of the CISG
1. Application rationae personae
The CISG is applicable in the following cases:

 If the sale of goods was concluded between parties whose places of business are located in
states that have entered into and ratified the CISG (art. 1(1)(a) CISG).
18
 If the rules of private international law lead to the application of the law of a state that
entered into and ratified the CISG (art. 1(1)(b) CISG). The CISG permits adopting countries
to “opt out” of several provisions (the reserves) as well as allows the parties to derogate
from or vary the effect of any provisions (art. 6 CISG).
 If the parties designate the CISG as the applicable law or rules of law (party autonomy).
Conversely, the principle of party autonomy that underlies many provisions of the CISG
also allows parties to exclude the application of the CISG or to derogate from some of its
provisions, barred certain exceptions (art. 6 CISG).
2. Application rationae materiae
The CISG governs some key terms and conditions of contracts for international sales of goods,
but not all terms and conditions.
 The CISG provisions only govern the formation and the interpretation of the contract of
sale, as well as the rights, obligations and remedies of the buyer and seller. It does not
contain provisions governing the validity of such contracts nor the passing of title of the
goods sold. It also does not cover liability of a seller for death or personal injury caused by
the seller’s goods, existence of agency relationships, forum selection, statutes of limitations,
interest rate issues, currency of payment, etc.
 The CISG contains a list of exclusions that pertain among others, to the types of good sold
(art. 2 CISG) and to the preponderant obligations of the contract entered into between the
parties. In particular, the CISG does not apply to contracts preponderantly for the sale of
services (art. 3 CISG).
B. Contract formation
The CISG dispenses with writing requirements (as well as with consideration requirements)
for the formation of the contract (art. 11 CISG). Contracts governed by the CISG may be
concluded by the mere exchange of offer and acceptance, verbally or in writing, and sometimes
even by silence accompanied by certain conduct (art. 14-24 CISG). The CISG also dispenses
with writing requirements for the modification of the contract, except where parties expressly
provided for such a requirement in the contract by means of a “no oral modification” (NOM)
clause (art. 29(1) CISG). However, a party may be precluded, by its own conduct, from
invoking a NOM clause, where the other party relied on that conduct (art. 29(2) CISG)).
Article 11 CISG (written form not required for formation)

A contract of sale need not be concluded in or evidenced by writing and is not subject to any
other requirement as to form. It may be proved by any means, including witnesses.
Article 29 (written form not required for modification except if NOM clause)
(1) A contract may be modified or terminated by the mere agreement of the parties.
(2) A contract in writing which contains a provision requiring any modification or termination
by agreement to be in writing may not be otherwise modified or terminated by agreement.
However, a party may be precluded by his conduct from asserting such a provision to the extent
that the other party has relied on that conduct.
C. Contract interpretation
The principle of good faith. The CISG provides for two cardinal principles that govern the
interpretation of its provisions (i.e. the provisions of the CISG): (a) uniformity in its application
and (b) the observance of good faith in international trade (art. 7(1) CISG). This latter principle
is followed and applied not only as a principle of interpretation of the CISG, but also as a
principle of interpretation of contracts governed by the CISG.
19
Rules of contract interpretation. Art. 8 CISG contains provisions for interpreting contracts
for the sale of goods that are subject to the CISG. Art. 8(1) CISG provides for a subjective
interpretation of a party’s statements according to “his (subjective) intent where the other party
knew (subjectively) or could not have been unaware of what that intent was (objectively)”. Art.
8(2) CISG provides for an objective interpretation of a party’s statements according to the
“understanding that a reasonable person of the same kind as the other party (objective) would
have had in the same circumstances (subjective).” Art. 8(3) CISG grants a wide discretion to
decision-making authorities to consider “all the relevant circumstances of the case”, whether
they be pre-contractual, arising in execution of the contract or post-contractual, including
negotiations, practices established between the parties, usages and any subsequent conduct of
the parties. Art. 9 CISG elevates usages to which the parties have agreed and practices
established between the parties to the level of sources generating binding obligations (art. 9(1)
CISG). Consent to be bound by a usage widely known and regularly observed is presumed,
unless the parties agree otherwise (art. 9(2) CISG).
Article 7 CISG (interpretation of the CISG)

(1) In the interpretation of this Convention, regard is to be had to its international character and
to the need to promote uniformity in its application and the observance of good faith in
international trade.
(2) Questions concerning matters governed by this Convention which are not expressly settled
in it are to be settled in conformity with the general principles on which it is based or, in the
absence of such principles, in conformity with the law applicable by virtue of the rules of
private international law.
Article 8 CISG (interpretation of statements and conduct by the parties)

(1) For the purposes of this Convention statements made by and other conduct of a party are to
be interpreted according to his intent where the other party knew or could not have been
unaware what that intent was.
(2) If the preceding paragraph is not applicable, statements made by and other conduct of a
party are to be interpreted according to the understanding that a reasonable person of the same
kind as the other party would have had in the same circumstances.
(3) In determining the intent of a party or the understanding a reasonable person would have
had, due consideration is to be given to all relevant circumstances of the case including the
negotiations, any practices which the parties have established between themselves, usages and
any subsequent conduct of the parties.
Article 9 CISG (usages and practices)

(1) The parties are bound by any usage to which they have agreed and by any practices which
they have established between themselves.
(2) The parties are considered, unless otherwise agreed, to have impliedly made applicable to
their contract or its formation a usage of which the parties knew or ought to have known and
which in international trade is widely known to, and regularly observed by, parties to contracts
of the type involved in the particular trade concerned.
IV. Special Rules for International Commercial Contracts: UNIDROIT Principles
The Principles of International Commercial Contracts of 2010 is a document drawn up by

UNIDROIT intended to help harmonize international commercial contracts law (known as the
UNIDROIT Principles of PICC). UNIDROIT (formally, the International Institute for the
Unification of Private Law) is an intergovernmental organization on harmonization of private
international law. Its projects include drafting of international conventions and production of
model laws. As of 2018, UNIDROIT had 63 member states.
20
The first edition of the UNIDROIT Principles was published in 1994, and the second, enlarged
edition, was published in 2004. The third edition was published in 2010. A fourth version was
published in 2016, including issues related to long-term contracts.
The UNIDROIT Principles set forth general rules for international commercial contracts. They
apply when the parties have agreed that their contract be governed by them, as rules of law
(rarely) and may be applied when the parties have agreed that their contract be governed by
general principles of law (for example, by referring to lex mercatoria). They may also be
applied when the parties have not chosen any law to govern their contract. Additionally, they
may be used to interpret or supplement international uniform law instruments (such as the
CISG) or domestic law. Lastly, the UNIDROIT Principles have served as a model for national
and international legislators.
ARTICLE 1.9 UNIDROIT Principles

(Usages and practices)
(1) The parties are bound by any usage to which they have agreed and by any practices which
they have established between themselves.
(2) The parties are bound by a usage that is widely known to and regularly observed in
international trade by parties in the particular trade concerned except where the application of
such a usage would be unreasonable.
ARTICLE 2.1.17 UNIDROIT Principles

(Merger clauses)
A contract in writing which contains a clause indicating that the writing completely embodies
the terms on which the parties have agreed cannot be contradicted or supplemented by evidence
of prior statements or agreements. However, such statements or agreements may be used to
interpret the writing.

(Contracting under standard terms)
(1) Where one party or both parties use standard terms in concluding a contract, the general
rules on formation apply, subject to Articles 2.1.20 - 2.1.22.
(2) Standard terms are provisions which are prepared in advance for general and repeated use
by one party and which are actually used without negotiation with the other party.

(Surprising terms)
(1) No term contained in standard terms which is of such a character that the other party could
not reasonably have expected it, is effective unless it has been expressly accepted by that party.
(2) In determining whether a term is of such a character regard shall be had to its content,
language and presentation.

(Conflict between standard terms and non-standard terms)
In case of conflict between a standard term and a term which is not a standard term the latter
prevails.

(Intention of the parties)
(1) A contract shall be interpreted according to the common intention of the parties.
(2) If such an intention cannot be established, the contract shall be interpreted according to the
meaning that reasonable persons of the same kind as the parties would give to it in the same
circumstances.
21
(Interpretation of statements and other conduct)
(1) The statements and other conduct of a party shall be interpreted according to that party’s
intention if the other party knew or could not have been unaware of that intention.
(2) If the preceding paragraph is not applicable, such statements and other conduct shall be
interpreted according to the meaning that a reasonable person of the same kind as the other
party would give to it in the same circumstances.

(Relevant circumstances)
In applying Articles 4.1 and 4.2, regard shall be had to all the circumstances, including
(a) preliminary negotiations between the parties;
(b) practices which the parties have established between themselves;
(c) the conduct of the parties subsequent to the conclusion of the contract;
(d) the nature and purpose of the contract;
(e) the meaning commonly given to terms and expressions in the trade concerned;
(f) usages.

(Reference to contract or statement as a whole)
Terms and expressions shall be interpreted in the light of the whole contract or statement in
which they appear.

(All terms to be given effect)
Contract terms shall be interpreted so as to give effect to all the terms rather than to deprive
some of them of effect.

(Contra proferentem rule)
If contract terms supplied by one party are unclear, an interpretation against that party is
preferred.

(Linguistic discrepancies)
Where a contract is drawn up in two or more language versions which are equally authoritative
there is, in case of discrepancy between the versions, a preference for the interpretation
according to a version in which the contract was originally drawn up.

(Supplying an omitted term)
(1) Where the parties to a contract have not agreed with respect to a term which is important
for a determination of their rights and duties, a term which is appropriate in the circumstances
shall be supplied.
(2) In determining what is an appropriate term regard shall be had, among other factors, to
(a) the intention of the parties;
(b) the nature and purpose of the contract;
(c) good faith and fair dealing;
(d) reasonableness.
22
V. Focus on the Contra Proferentem Rule
Contracts can be complex documents created after long periods of protracted negotiations.
Each party in the contract is ostensibly looking out for its own best interests and will want the
contract language to be to each party’s favor. This can create scenarios in which the contract
language is ambiguous or unclear, leading one party to interpret the contract differently from
the other party. The contra proferentem rule is a rule in contract law which states that any
clause considered to be ambiguous should be interpreted against the interests of the party that
requested that the clause is included. The contra proferentem rule guide the interpretation of
contracts and is typically applied when a contract is challenged in court.
The contra proferentem rule is designed as a sort of punishment for a party that introduces
intentionally vague language into a contract. The underlying idea is that the party is being
vague to provide it with the most latitude and that this is unfair to the other party.
Courts use a multi-step process in determining whether the contra proferentem rule applies in
the review of a contract. The first step is to review the contract language to determine whether
a clause is ambiguous enough to cause uncertainty. If the clause is determined to be ambiguous,
the court will then attempt to determine the intent of the parties when they entered into the
contract. If the evidence does not dispel the ambiguous nature of the contract language, then
the contra proferentem rule may be applied, and the party that did not include the language is
ruled in favor of. It is often said that the contra proferentem rule is a rule of last resort.
Restatement (Second) of Contracts (American Law Institute, 1981)

§ 206. Interpretation Against the Draftsman
In choosing among the reasonable meanings of a promise or agreement or a term thereof, that
meaning is generally preferred which operates against the party who supplies the words or from
whom a writing otherwise proceeds.
UNDROIT Principles of International Commercial Contracts (2010)

Article 4.6 (Contra proferentem rule)
If contract terms supplied by one party are unclear, an interpretation against that party is preferred.
Art. 1268 Romanian Civil Code

Interpretarea clauzelor îndoielnice
(1) Clauzele susceptibile de mai multe înţelesuri se interpretează în sensul ce se potriveşte cel
mai bine naturii şi obiectului contractului.
(2) Clauzele îndoielnice se interpretează ţinând seama, între altele, de natura contractului, de
împrejurările în care a fost încheiat, de interpretarea dată anterior de părţi, de sensul atribuit în
general clauzelor şi expresiilor în domeniu şi de uzanţe.
(3) Clauzele se interpretează în sensul în care pot produce efecte, iar nu în acela în care nu ar
putea produce niciunul.
(4) Contractul nu cuprinde decât lucrul asupra căruia părţile şi-au propus a contracta, oricât de
generali ar fi termenii folosiţi.
(5) Clauzele destinate să exemplifice sau să înlăture orice îndoială asupra aplicării contractului
la un caz particular nu îi restrâng aplicarea în alte cazuri care nu au fost expres prevăzute.

Regulile subsidiare de interpretare
(1) Dacă, după aplicarea regulilor de interpretare, contractul rămâne neclar, acesta se
interpretează în favoarea celui care se obligă.
(2) Stipulaţiile înscrise în contractele de adeziune se interpretează împotriva celui care le-a
propus.
23
Interpretarea clauzelor vânzării
Clauzele îndoielnice în contractul de vânzare se interpretează în favoarea cumpărătorului, sub
rezerva regulilor aplicabile contractelor încheiate cu consumatorii şi contractelor de adeziune.
Art. 1 Legea nr. 193/2000 privind clauzele abuzive din contractele încheiate între
profesionişti şi consumatori (republicată în Monitorul Oficial al Românei, Partea I, nr.
305 din 18 aprilie 2008, cu modificările ulterioare)
(1) Orice contract încheiat între profesionişti şi consumatori pentru vânzarea de bunuri sau
prestarea de servicii va cuprinde clauze contractuale clare, fără echivoc, pentru înţelegerea
cărora nu sunt necesare cunoştinţe de specialitate.
(2) În caz de dubiu asupra interpretării unor clauze contractuale, acestea vor fi interpretate în
favoarea consumatorului.
(3) Se interzice profesioniştilor stipularea de clauze abuzive în contractele încheiate cu
consumatorii.
VI. Focus on the Parol Evidence Rule and Merger Clauses
In its most simple form, the parol evidence rule (also known as the “four corners rule”) states
that, absent fraud, mistake, duress or any other invalidation cause, the parties’ final and
complete written integration of their agreement cannot be varied, contradicted or supplemented
by evidence of prior or contemporaneous oral or written agreements, understandings or
representations. Through the process of integration, the parties make a written memorial not
solely one source of the terms of their agreement, but the only source recognizable at law. The
policy underlying the parol evidence rule is that evidence outside the contract can be
untrustworthy because negotiations between the parties evolve and because witness memory
can be slippery. Thus, the parol evidence rule provides in substance that, where the parties have
reduced their agreement to writing as the final and complete expression of their agreement,
evidence of prior or contemporaneous agreements may not be offered to contradict, vary, or
subtract from the terms of the writing.
The parol evidence rule is an integral doctrine of the common law on contracts. The rule was
established in the 17th century English common law and has since spread amongst most of the
common law jurisdictions (and in some mixed jurisdictions). In contrast, the parol evidence
rule is virtually unknown in civil law countries. Cases held that “to a businessman from a civil
law country, concepts like the parol evidence rule do not make much sense” [BQP v. BQQ,
Singapore High Court, 14 March 2018]. The general prohibition on evidence of pre-contractual
negotiations was also memorably excoriated by common law judges such as Lord Nicholls,
who in his extrajudicial writing criticized the prohibition as “perverse” for tending to withhold
from the adjudicator’s consideration “the best evidence of all” of the parties’ intentions (Donald
Nicholls, My kingdom for a horse: the meaning of words [2005] LQR 577, p. 583).
A. Origins of the parol evidence rule
The parol evidence rule originated in the 17th century English common law. The rule stems
from the traditional common law approach toward written instruments, in which written
documents were afforded a privileged legal status as the superior or even exclusive evidence
of the substance of an agreement. When the rule was first established, it was designed to protect
the stability and certainty of such written instruments, and ascertain predictability in the judicial
review thereof. In the English common law there has been a judicial recognition of written
documents as superior to other forms of evidence for the purpose of establishing the substance
of an agreement since the mid second century.
24
The parol evidence rule originated within a context of a broader shift in the English common
law from oral to written law, in which written legal acts instead of verbal became the main
evidentiary focus in the judicial practice. Prior to this development, courts regarded written
evidence as less trustworthy than testimony, even to such an extent that a written document
was judicially recognized only if it was supported by testimony.
Perhaps the most important influence of the development whereby writings acquired a
judicially privileged status in contract law was the use of the seal, a practice according to which
a document was closed with wax and imprinted with designs of the contracting parties. Any
oral or non-sealed written agreement, made either prior to, or post the execution of a sealed
instrument, could not judicially affect the substance of the parties’ contract. The instrument
was regarded in law as constitutive of the parties’ agreement, and as such, it protected itself
from any attempts of either party to contradict or add to its substance on the basis of evidence
outside of the actual document. As such, sealed instruments were, in and of themselves,
impervious to extrinsic evidence that contradicted or supplemented their substance.
First, the parties’ act of affixing their seal on the written instrument was regarded as a kind of
waiver, according to which the parties were regarded as having already testified to its validity
and accuracy in terms of embodying the parties’ complete agreement. The parties had thereby
waived their right to introduce evidence to contradict the substance of a sealed document at
trial because they were regarded as having already testified to its accuracy.
Second, sealed instruments were accorded a higher degree of merit above that of any other
evidence, and could, as such, not be contradicted or varied by evidence of an inferior form,
irrespective of the quality of that evidence or how poorly the sealed instrument may have
represented the actual agreement between the parties.
Eventually, when unsealed written instruments became common practice, judges in the English
common law approached such written instruments with an interest of establishing a similar
respect for their integrity, as was afforded sealed instruments. Consequently, sporadically and
without much legal basis, judges would refuse to allow testimony to contradict or vary the
substance of a written instrument, even though not sealed. In 1604, the judges of the King’s
Bench decided the first case in which the parol evidence rule was pronounced (the Countess of
Rutland’s case). The case reporter, Sir Edward Coke, is credited with first pronouncing the
actual rule and its name: “A written deed will bar parol evidence.” The case report explained
the rationale for the rule: “It would be inconvenient, that matters in writing made by advice and
on consideration, and which finally import the certain truth of the agreement of the parties
should be controlled by averment of the parties to be proved by the uncertain testimony of
slippery memory. And it would be dangerous to purchasers and farmers, and all others in such
cases, if such nude averments against matter in writing should be admitted.”
B. Evolution of the parol evidence rule
Difficulties. When the rule was first established, it had a rather straightforward substantive
character which forbid contracting parties who had reduced their agreement to a written
instrument to vary, subtract from, or add to, the substance of the writing on the basis of evidence
extrinsic thereto in a subsequent trial. Despite its initial simplicity, the rule has developed into
one of the most controversial, complex and misunderstood contract doctrines of the common
law today and has been the subject of a substantial amount of litigation in the U.S.
One of the primary sources of confusion regarding the rule is its name:
 The rule is not a rule of evidence (it is a substantive rule)
 The rule does not apply solely to parol evidence (but also to written evidence)
 It is not a singular rule (but rather a cluster of legal concepts and doctrines)
25
Contrary to what the name implies, it is not a rule of evidence, it does not deal with the method
by which a fact can be proven, rather it is a rule of substantive law that dictates whether a
certain fact is material for the purpose of establishing the substance of a contract. The parol
evidence rule is widely regarded a rule of substantive contract law in that it prohibits a party
from establishing certain legal facts altogether, which has the consequences that certain
evidence that are introduced to establish such a fact, will be barred by the court. As such,
despite being widely regarded as a rule of substantive law, it has in actual practice been treated
as a rule of admissibility. The source of much confusion regarding the rule has to do with the
fact that the rule is sometimes used by courts as an evidentiary rule to render extrinsic evidence
inadmissible, making the rule a de facto rule of evidence, or at least operating as such. If the
rule is regarded as operating to make certain legal facts immaterial, and thereby prohibits a
party from establishing the fact altogether, the rule, on the contrary, operates as a rule of
substantive law. While the parol evidence is widely regarded as a rule of substantive law, it
should however be noted that in one sense the parol evidence rule is procedural. The rule is
often said to require the judge instead of the jury to determine whether a writing shall be
regarded as the exclusive and complete integration of an agreement.
The rule is not limited to parol evidence. The word “parol” usually connotes word of mouth,
i.e. oral communication. The term is however derived from the French and Italian terms for
“word,” which better describes the scope of the rule, as it applies equally to written as well as
oral evidence, be it in the form of negotiations, representations, understandings or agreements.
Because the rule applies to all evidence, to avoid unnecessary confusion, the term “extrinsic
evidence” is commonly used in connection to the discussion of the rule, a term that includes
all evidence irrespective of form, which arises outside of a written contract. The parol evidence
rule applies to any prior or contemporaneous agreement or understanding, parol or written, that
preceded an agreement reduced to writing.
The rule can also be said not to be an actual rule of law, more poignantly, it should be regarded
as a cluster of legal concepts and doctrines, all relating to the issue of how to distinguish the
facts from which the substance of a contract is derived, from the facts that are immaterial for
that purpose, relative a written instrument. As such, the parol evidence rule can be regarded as
the legal framework, or body of doctrine, in which the law identifies the legally operative
agreement, i.e. the contract, in a midst of lengthy prior negotiations riddled with different
proposals, tentative agreements, oral understandings and representations that concluded with a
written instrument.
Consequently, all of the words of the rule’s unfortunate name lend themselves to sources of
confusion to the actual nature and scope of the rule.
Versions of the parol evidence rule. In the U.S. common law, during the 20th century, the
parol evidence rule changed considerably in terms of its substantive character, most
importantly due to the scholarship of two of the most prominent contract scholars of the
century, Professor Samuel Williston and Professor Arthur L. Corbin. One can say that the
common law parol evidence rule exists in two significantly different versions within the U.S.
contract law, a Williston and a Corbin version, albeit with the caveat that each respective
jurisdiction has developed their own variation of either version.
The integration doctrine. The integration doctrine developed alongside the parol evidence
rule during the 20th century, became integral to the jurisprudence of the parol evidence rule
and fundamentally changed the rule’s legal character. In other words, when parties reduce their
contract to writing, the law presumes the instrument to be complete, to contain all their
agreement, and it cannot be modified by parol evidence. The Restatement (Second) of
Contracts defines integrated agreements and distinguishes between completely and partially
integrated agreements (§ 209 and § 210 of the Restatement (Second) of Contracts).
26
 An “integrated agreement” is a writing or writings constituting a final expression of one or
more terms of an agreement. A rebuttable presumption is established. If a written agreement
reasonably appears, in view of its completeness and specificity, to be a complete agreement,
it will be presumed to be an integrated agreement unless it is established by other evidence
that the writing did not constitute a final expression. Consequently, the parol evidence rule
does not bar evidence meant to establish that an agreement is not an integrated agreement.
An integrated agreement discharges prior agreements to the extent that it is inconsistent with
them (§ 213(1) of the Restatement (Second) of Contracts).
 A “completely integrated agreement” is an integrated agreement adopted by the parties as a
complete and exclusive statement of the terms of the agreement. A completely integrated
agreement discharges prior agreements to the extent that they are within its scope (§ 213(2)
of the Restatement (Second) of Contracts).
 A “partially integrated agreement” is an integrated agreement other than a completely
integrated agreement. The parol evidence rule does not bar evidence meant to establish
whether an agreement is completely or partially integrated. Evidence of a consistent
additional term is admissible to supplement a partially integrated agreement (§ 216 of the
Restatement (Second) of Contracts).
 Rule: If there is an integrated agreement (completely or partially integrated), evidence of
prior or contemporaneous agreements or negotiations is not admissible in evidence to
contradict a term of the writing (§ 215 of the Restatement (Second) of Contracts).
 Exception: Agreements and negotiations prior to or contemporaneous with the adoption of
a writing are admissible in evidence to establish: (a) that the writing is or is not an integrated
agreement, (b) that the integrated agreement is completely or partially integrated, (c) the
meaning of the writing, (d) illegality, fraud, duress, mistake, lack of consideration, or other
invalidating cause, (e) ground for granting or denying rescission, reformation, specific
performance, or other remedy (§ 215 of the Restatement (Second) of Contracts).
Merger clauses. The jurisprudence of the parol evidence rule also resulted in a common
contract clause, which is employed with the purpose of protecting written instruments from
extrinsic impeachment at a possible subsequent judicial process. Such a clause is known as
integration clause, a merger clause or entire agreement clause. While the parol evidence rule
has not spread amongst the civil law jurisdictions, the contract clause developed on the basis
thereof, has and is frequently employed in contracts governed by civil law jurisdictions without
a parol evidence rule. The UNIDROIT Principles refer to merger clause in art. 2.1.17: “A
contract in writing which contains a clause indicating that the writing completely embodies the
terms on which the parties have agreed cannot be contradicted or supplemented by evidence of
prior statements or agreements. However, such statements or agreements may be used to
interpret the writing.” In practice, merger clauses will often be expressed as follows:
 This Agreement sets forth the entire agreement between the parties with respect to the
subject matter hereof and supersedes any and all prior agreements and understandings, both
oral and written, between the parties with respect to the subject matter hereof.
 Except as otherwise expressly set forth herein, this Agreement embodies the complete
agreement and understanding among the parties hereto with respect to the subject matter
hereof and supersedes and preempts any prior understandings, agreements or
representations by or among the parties, written or oral, which may have related to the
subject matter hereof in any way.
 This Agreement, together with the terms and conditions attached hereto, contains the entire
agreement of the parties hereto with respect to the subject matter of this Agreement. Any
and all prior discussions or agreements with respect hereto are merged into and superseded
by the terms of this Agreement.
27
C. Simplification of the parol evidence rule under the UCC
The UCC codified a version of the parol evidence rule (UCC § 2-202). Contrary to the common
law, the rule in the UCC is self-executing and relatively uncomplicated. The UCC modified
the common law doctrine of the parol evidence rule somewhat. The UCC’s version of the parol
evidence rule was intended to liberalize the rule and rejected the traditional presumption that a
writing constitutes a complete integration.
UCC § 2-202 provides that terms set forth “in a writing intended by the parties as a final
expression of their agreement [...] may not be contradicted by evidence of any prior agreement
or of a contemporaneous oral agreement but may be explained or supplemented (a) by course
of dealing or usage of trade or by course of performance and (b) by evidence of consistent
additional terms unless the court finds the writing to have been intended also as a complete and
exclusive statement of the terms of the agreement.
Under the UCC, extrinsic evidence may not be used to contradict a writing that was intended
by the parties as a final expression of their agreement. Even though the UCC does not use such
terminology, a writing intended as final is treated as a partial integration, and a writing that is
intended to be final as well as complete, is regarded as a complete integration, and, therefore,
may not be contradicted or supplemented by extrinsic evidence. In this respect, the UCC does
not differentiate itself from the common law rule. Similarly, courts may admit extrinsic
evidence to determine whether the writing was agreed upon as a partial or complete integration
of the parties’ agreement. Only thereafter can any such evidence be excluded.
D. The parol evidence rule and the CISG
The CISG is a substantive law and as such it preempts the otherwise applicable substantive
domestic law. It is not a procedural law and therefore does not affect the procedural or
evidentiary rules of the applicable forum. The issue of the parol evidence rule, or rather the
issue of whether there should be any evidentiary limits for a party when attempting to introduce
evidence to the effect of contradicting or supplementing a written contract, was subject of
debate during the drafting sessions of the CISG in 1980. One of the representatives for Canada
proposed an amendment to include a version of the parol evidence rule that is similar to the
Williston approach in the U.S. This suggestion was however met with much criticism,
especially from a few delegates of civil law nations because it was viewed as conflicting with
evidentiary principles of the civil law, according to which a court is permitted to review all
evidence. The proposed amendment did not receive much support and was rejected upon vote.
Under art. 8(1) CISG, the subjective intent of the parties is to be the primary interpretative
source, but only insofar as the other party knew or could not have been unaware what that
intent was. When this approach is insufficient, an objective test applies, the understanding of a
reasonable person, under art. 8(2) CISG. Furthermore, art. 8(3) CISG directs courts to give
“due consideration” to “all relevant evidence” in the interpretation process under art. 8(1) and
art. 8(2) CISG. This is a clear rejection of any limits to what types of evidence a party can argue
along the lines of in this regard. Moreover, art. 11 CISG provides that a contract of sale need
not be concluded in or evidenced by writing and “may be proved by any means, including
witnesses”. Art. 11 and art. 8(3) CISG, in tandem, can therefore be said to establish a general
principle that written evidence of contracts does not enjoy a special status substantively, other
than having inherent practical evidentiary advantages. Accordingly, the CISG does not retain
a presumption that a writing constitutes an integration, either partial or complete. Of course,
written contracts may be held in higher regard, relative to oral contracts, pursuant to the
applicable rules of evidence, which will be governed by the law of the forum, not the CISG.
However, the CISG, as a substantive contract law, does not make any such stipulation.
28
In 1998, the Court of Appeals for the Eleventh Circuit decided a case, MCC-Marble Ceramic
Center, Inc. v. Ceramica Nuova D’Agostino, S.p.A., that has subsequently been described as
“the leading case” with regards to the issue of whether there is a parol evidence rule under the
CISG. The district court held that, despite the subjective intentions of the parties, the written
contract was a complete integration which precluded any resort to extrinsic evidence, and
granted summary judgment in D’Agostino’s favor, although without making reference to the
parol evidence rule by name. On appeal, the Eleventh Circuit, in contrast, held that the director
of D’Agostino was admittedly aware of the president of MCC’s subjective intent and that art.
8(1) CISG applied. Consequently, the Eleventh Circuit held that the district court should have
considered the offered evidence of the parties’ subjective intent pursuant to art. 8(1) CISG
when interpreting the contract. MCC had therefore raised an issue of material fact concerning
the parties’ subjective intent, which precluded summary judgment. Accordingly, the Eleventh
Circuit reversed the grant of summary judgment and remanded the case for further proceedings
consistent with their opinion. Had the Eleventh Circuit court stopped there, the case would not
have become the leading and highly regarded case it is considered as today. The court took the
opportunity to address whether the parol evidence rule plays any role in cases involving the
CISG. The court noted that because the parol evidence rule is a substantive rule of law, as
opposed to a rule of evidence, the CISG preempts its application. As such, a court cannot apply
the rule as a procedural matter, but only insofar as it is a part of the CISG. The court pointed
out, however, that issues of contract formation will more commonly be decided against the
backdrop of art. 8(2) CISG, under which objective evidence will be the sole material evidence
in this regard, rendering the un-manifested subjective intent immaterial. Furthermore, the court
pointed out that to the extent parties wish to avoid parol evidence problems they can do so by
including a merger clause in their agreement, thereby suggesting that merger clauses would be
similarly as effective under the CISG as in American contract case law.
After the MCC-Marble decision, the Association of the Bar of the City of New York
Committee on Foreign and Comparative Law made a request to the CISG Advisory Council
for a clarification with regards to whether there is a parol evidence rule under the CISG. The
Council responded with an opinion issued in 2004. The opinion reaffirmed the Eleventh Circuit
opinion by concluding that the CISG includes “no version” of the parol evidence rule, and that
there is no gap in the CISG with regards to the questions governed by the parol evidence rule,
and as such, the rule cannot be invoked through the process of gap-filling.
The CISG is a clear rejection of the tenants of the Williston version of the parol evidence rule
under U.S. common law but resonates with the tenants of the Corbin version of the parol
evidence rule. However, the legislative history of the CISG and the Council’s opinion regarding
the parol evidence rule focused solely on the rule’s ban on extrinsic evidence, which was
viewed as directly conflicting with the established civil law principle of free admissibility of
evidence. But the focus of the parol evidence rule is on how different agreements, when one is
reduced to writing, between the same parties, made at different moments in time legally relate
to each other. The parol evidence rule will, if applicable, render the fact of one agreement
legally immaterial for the benefit of another, and therefore forbid the fact itself from being
established, whereby evidence thereof can be barred. Basically, that which happened today can
control the legal effect of what happened yesterday, but that which happened yesterday cannot
control the legal effect of what happens tomorrow.
The CISG lacks any explicit reference to an integration doctrine. Therefore, the mere act of
integrating an agreement in a writing does not necessarily trigger the legal consequence of
discharging and displacing any omitted terms thereby, as dictated by the integration doctrine.
However, given that the integration doctrine operates by consequence of the parties’ intentions
to that effect, it is consistent with the CISG’s emphasis on the actual intentions of the
contracting parties as being the primary interpretative source pursuant to art. 8.
29
In its opinion, the CISG Advisory Council suggested that prior negotiations and other extrinsic
circumstances should not be considered during contract interpretation if the parties reduced
their agreement to writing and intended their writing as the sole manifestation of their
obligations. This represents an explicit recognition of the legal validity of integration under the
CISG but the more detailed legal consequences (including the pivotal distinction between
partial and complete integration) are not straightforward. That gap can be a cause for concern
for parties attempting to protect the integrity of their written contract on the basis of an
integration. Merger clauses were first employed against a legal environment in which a writing
was regarded as the complete integration of the parties’ agreement if it appeared as such on its
face. The function of the merger clause was to facilitate such an appearance of the writing. The
CISG rejects such a presumptive substantive approach toward written instruments. Writings
are not to be presumed to be “integrations”. In other words, writings are not to be presumed to
be either a final nor a complete representation of the parties’ agreement (there is no
presumption of either partial or complete integration of written instruments). Instead, the legal
significance of a writing will be reviewed by admitting and reviewing all relevant evidence.
Because the legal framework against which the original merger clause was first drafted is
significantly different, the issue of the functionality and effectiveness of merger clauses under
the CISG has been the subject of much controversy. Merger clauses were proclaimed to be
effective under the CISG, but the legal framework against which such clauses were originally
designed was rejected.
Merger clauses are generally not evidentiary or procedural. Their purpose is to make the writing
the sole source of the parties’ agreement, which, if successful, renders any representation of an
additional or contradictory agreement immaterial in the judicial determination of what the
parties’ contract consists of. Any evidence purporting to establish an immaterial fact will not
likely be admitted into any judicial proceeding. As such, an effective merger clause facilitates
a less complicated dispute resolution, in an evidentiary sense, but the clause does not
accomplish this by forbidding either party to introduce certain evidence of prior agreements,
but by making the same agreements immaterial for the purpose of their enforcement.
A merger clause as a statement of fact is dependent upon the parol evidence rule to have an
effect of protecting the integrity of the writing. Such a clause must invoke the parol evidence
rule to function and thereby the parties must derogate from art. 8(3) CISG (under art. 6 CISG)
with a reference to another substantive law with the parol evidence rule to be effective.
A merger clause as a separate agreement, on the contrary, does not depend on the parol
evidence rule to effectively protect the writing from extrinsic impeachment. Consequently,
such a merger clause does not need to contain an explicit derogation from art. 8(3) CISG
(through art. 6 CISG), but will be as effective under the CISG as it would be pursuant to the
substantive law of a jurisdiction lacking in a parol evidence rule (or containing a Corbin
inspired version). The notion that a merger clause is effective because it invokes the parol
evidence rule, is true only if the merger clause is employed as a statement of fact.
Because the integration doctrine is dependent upon intent, parties who wish to commit
themselves exclusively to the writing must facilitate the finding of such intent, within the four
corners of the writing. A simple merger clause that states that the writing constitutes the parties
complete and final agreement does not involve an explicit intention of the parties to discharge
any prior agreements, and completely integrate their agreement therein. Rather, it is a statement
that characterizes the writing as a complete integration. The validity of such a statement will
be reviewed in light of all relevant evidence, and if an extrinsic agreement is thereby
established, the statement will be false and unenforceable. Therefore, instead of facilitating the
mere appearance of completeness and finality of a written instrument, a merger clause should
be drafted to facilitate the necessary finding upon which the integration doctrine is premised,
namely the actual intent to integrate, either partially or completely, the parties’ agreement.
30
CHAPTER 3 : EXEMPLIFICATION
I. Buildings blocks of corporate contracts
PURCHASE AGREEMENT
This Purchase Agreement (“Agreement”) is made and entered into as of April 29,
2015, by and among Granola Inc. (the “Company”) and RR Investment Ltd. (“RR” and,
together with the Company, the “Parties”).
WHEREAS, RR desires to purchase from the Company, and the Company desires to
sell and issue to RR, upon the terms and conditions stated in this Agreement, shares of the
Company’s Common Stock, par value $0.0001 per share (the “Common Stock”), at a purchase
price of $6.00 per share (the “Purchase Price Per Share”).
WHEREAS, concurrently with the execution hereof, the Parties shall enter into and
execute the Voting and Standstill Agreement (the “Voting and Standstill Agreement”), the
Registration Rights Agreement (the “Registration Rights Agreement”) and the
Confidentiality Agreement (“Confidentiality Agreement” and, together with this Agreement,
the Voting and Standstill Agreement and the Registration Rights Agreement, the “Transaction
Documents”), each by and among the Company and RR and to be dated the date hereof.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the
Parties hereto hereby agree as follows:
1. Purchase and Sale of the Shares; Closings.
1.1. The Closing. The Company agrees to issue and sell to RR, and RR agrees to
purchase from the Company, 12,500,000 shares of Common Stock in exchange for an
aggregate purchase price of $75,000,000, representing the Purchase Price Per Share multiplied
by the number shares of Common Stock (the amount so calculated, the “Purchase Price”).
The closing shall be held at the offices of Greenberg Traurig LLP, 200 Park Avenue, New
York, NY 10166, within five (5) Business Days (defined below) from the execution of this
Agreement (the “Closing”), subject to the satisfaction or, to the extent permitted by applicable
law, waiver of all conditions to the obligations of the Parties set forth in Section 2. The day on
which the Closing takes place is referred to as the “Closing Date.” For purposes of this
Agreement, “Business Day” shall mean a day, other than Saturday, Sunday or any other day
on which commercial banks in New York, NY are authorized or required by law to close.
1.2. Closing. On the Closing Date, (a) the Company shall (i) instruct its transfer
agent to transfer the applicable Shares to RR in book-entry form and (ii) provide to RR
reasonable evidence of such book-entry transfer, and (b) RR shall cause a wire transfer in same
day funds to be sent to the account of the Company as instructed in writing by the Company,
in the amount of the applicable Purchase Price.
2. Conditions to Closing. The respective obligations of the Company and RR to

consummate the transactions contemplated by this Agreement at the Closing shall be subject
to the fulfillment, at or prior to the Closing Date, of the following conditions, which may, to
the extent permitted by applicable law, be waived in writing by all Parties in their sole
discretion:
31
2.1. Transaction Documents. The Company and RR shall each have executed and
delivered the Voting and Standstill Agreement, the Registration Rights Agreement and the
Confidentiality Agreement.
2.2. No Injunction or Prohibition. No United States or non-United States federal,

state, provincial, local or similar government, governmental, regulatory or administrative
authority, branch, agency or commission or any court, tribunal, or arbitral or judicial body
(each, a “Governmental Authority”) shall have enacted, issued, promulgated, enforced or
entered any law, rule, regulation, judgment, injunction, order or decree (in each case, whether
temporary, preliminary or permanent) that is then in effect, and no action or proceeding shall
have been initiated by any Governmental Authority the intent of which, in each case, is to
enjoin, restrain, condition, limit, make illegal or otherwise prohibit the consummation of the
transactions contemplated by the Transaction Documents. In particular, no stop order or
suspension of trading shall have been imposed by The NASDAQ Stock Market, the United
States Securities and Exchange Commission (the “SEC”) or any other Governmental Authority
with respect to the Common Stock.
2.3. HSR Approval. The termination or expiration prior to the Closing Date of any
waiting period (and any extension thereof) under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (“HSR Act”), and the rules and regulations thereunder
or any similar required foreign antitrust, competition or similar laws applicable to the
transactions contemplated hereunder.
2.4. Bring-down of Representations and Warranties. The representations and

warranties of the Company and RR in this Agreement shall be true and correct in all material
respects on and as of the date hereof and on and as of the Closing Date as though such
representations and warranties were made on and as of such date (except for representations
and warranties which address matters only as to a specified date, which representations and
warranties shall be true and correct with respect to such specified date).
3. Representations and Warranties of the Company. The Company hereby

represents and warrants to RR that:
3.1. Organization and Standing. The Company and each of its material subsidiaries
are duly organized, validly existing and in good standing, to the extent applicable, under the
laws of its jurisdiction of organization. The Company is not in violation of any of the provisions
of its certificate of incorporation, bylaws, or equivalent organizational or governing documents.
3.2. Authority; Noncontravention.
(a) The Company has all requisite corporate power and authority to enter into the
Transaction Documents and to consummate the transactions contemplated thereunder. The
execution and delivery of the Transaction Documents and the consummation of the transactions
contemplated thereunder have been duly authorized by the Company’s Board of Directors (the
“Board”). The Transaction Documents have been duly executed and delivered by the
Company and constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms. The adoption of the Transaction Documents and
issuance of the Shares does not require the vote or approval of the holders of the Common
Stock or the holders of any securities in the Company’s subsidiaries.
(b) The execution and delivery of the Transaction Documents by the Company does
not, and the consummation of the transactions contemplated thereunder, including the issuance
of the Shares, will not (i) result in the creation of any encumbrance on any of the material
properties or assets of the Company or the Shares, (ii) conflict with, or result in any violation
32
of or default under, or give rise to a right of termination, cancellation or acceleration of any
obligation or loss of any benefit under any provision of the certificate of incorporation or
bylaws of the Company, (iii) conflict with, or constitute a default under, or give to others any
rights of termination, amendment, acceleration or cancellation of, any Material Contract, or
(iv) conflict with, or result in any violation of or breach of any statute, rule, regulation, order
or other legal requirement of any Governmental Authority having jurisdiction over the
Company, any of its subsidiaries or any of their respective assets or properties. For purposes
of this Agreement, “Material Contract” shall mean any contract, instrument or other
agreement to which the Company or any of its subsidiaries is a party or by which it is bound
which is material to the business of the Company and its subsidiaries, taken as a whole.
(c) No consent, approval, order or authorization of, or registration, declaration or

filing with, any Governmental Authority, is required by or with respect to the Company in
connection with the execution and delivery of the Transaction Documents or the consummation
of the transactions contemplated thereunder, except for [...].
3.3. Capitalization. The Company has the capitalization set forth in its Annual
Report on Form 10-K for the fiscal year ended December 31, 2014 (the “10-K”). Except as
described in the SEC Filings, there are no voting agreements, buy-sell agreements, option or
right of first purchase agreements or other agreements of any kind among the Company and
any of the securityholders of the Company relating to the securities of the Company.
3.4. Valid Issuance. The Shares have been duly and validly authorized and, when
issued pursuant to this Agreement, will be validly issued, fully paid and nonassessable, and
shall be free and clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws. The issuance
of the Shares does not contravene the rules and regulations of The NASDAQ Stock Market.
3.5. Poison Pill. The Company does not have outstanding stockholder purchase
rights or “poison pill” or any similar arrangement in effect giving any Person the right to
purchase any equity interest of the Company upon the occurrence of certain events.
3.6. SEC Filings. The Company has timely filed with or otherwise furnished (as
applicable) to the SEC all filings required to be made by it pursuant to the Exchange Act and
the Securities Act (the “SEC Filings”). As of their respective dates, the SEC Filings complied
in all material respects with the applicable requirements of the Securities Act and the Exchange
Act and did not contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
3.7. Litigation. Except as described in the SEC Filings, there are no material
pending legal proceeding before any Governmental Authority against or affecting the
Company, its subsidiaries or any of its or their properties; and to the Company’s knowledge,
no such legal proceedings are threatened.
3.8. Financial Statements. The financial statements included in each SEC Filing
comply in all material respects with applicable accounting requirements and the rules and
regulations of the SEC as in effect at the time of filing (or to the extent corrected by a
subsequent restatement) and present fairly, in all material respects, the consolidated financial
position of the Company as of the dates shown.
3.9. Intellectual Property. The Company and its subsidiaries own, or possess or have
obtained valid licenses for, or other legal and valid rights to use, the material Intellectual
Property (as defined below) necessary for the conduct of the business of the Company and its
33
subsidiaries as currently conducted. “Intellectual Property” means any Registered Intellectual
Property and any (i) trade secrets under applicable law, including confidential and proprietary
information and know-how; (ii) computer software programs; and (iii) unregistered
trademarks, trademark applications, trade dress, logos and corporate names. For purposes of
this Agreement, “Registered Intellectual Property” means any of the following, as they exist
anywhere in the world, to the extent registered: (a) patents, patent applications and statutory
invention registrations; (b) trademarks, service marks, domain names and trade names; and
(c) copyrights and mask works.
4. Representations and Warranties of RR. RR hereby represents and warrants to

the Company that:
4.1. Organization and Standing. RR is a corporation duly organized, validly existing

and in good standing, to the extent applicable, under the laws of its jurisdiction of organization
and has the corporate power and authorization to own, lease and operate its assets and
properties and to conduct its business.
4.2. Authority; Non-Contravention.
(a) RR has the requisite corporate power and authority to enter into the Transaction
Documents and to consummate the transactions contemplated thereunder. The execution and
delivery of the Transaction Documents and the consummation of the transactions contemplated
thereunder have been duly authorized by all requisite corporate action by RR. The Transaction
Documents have been duly executed and delivered by RR and constitute the valid and binding
obligations of RR enforceable against RR in accordance with their terms.
(b) The execution, delivery and performance by RR of this Agreement and the other
Transaction Documents and the consummation by RR of the transactions contemplated hereby
and thereby will not (i) result in a violation of the organizational or constitutional documents
of RR, (ii) conflict with, or constitute a default under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any contract to which RR is a party,
or (iii) result in a violation of any applicable law to RR or by which any property or asset of
RR is bound or affected.
(c) Except as contemplated in this Agreement, (i) no consent, approval, order or

authorization of, or registration, declaration or filing with, any Governmental Authority, is
required by or with respect to RR in connection with the execution and delivery of the
Transaction Documents or the consummation of the transactions contemplated thereunder or
(ii) any consent, approval or authorization from or any waiver by any third party pursuant to
any contract to which it is a party.
5. Covenants.
5.1. Consents and Filings. The Parties shall use their commercially reasonable
efforts (a) obtain from Governmental Authorities and other Persons all consents, clearances,
approvals, authorizations, qualifications and orders and give all notices as are necessary for the
consummation of the transactions contemplated by this Agreement, and (b) as promptly as
practicable make all necessary filings, and thereafter make any other required submissions,
with respect to this Agreement required under applicable law, including the necessary filings
under the HSR Act within ten (10) Business Days after the date hereof.
5.2. Transfer Restriction. During the period from the Closing until the date which is
eighteen (18) months following the Closing Date (“Lock-Up Period”), RR and its controlled
Affiliates shall not transfer or otherwise dispose of any of the Shares unless such transfer is to
34
a controlled Affiliate. For purposes of this Agreement, “Affiliate” means, with respect to any
specified person, any other person who directly or indirectly, controls, is controlled by, or is
under common control with such person, including any investment fund.
6. Termination.
6.1. Grounds for Termination. This Agreement may be terminated, at any time prior
to the Closing: (a) by the mutual written consent of each Party hereto; (b) by RR or the
Company if the Closing shall not have occurred before April 29, 2016; or (c) by any Party in
the event that any Governmental Authority shall have issued a judgment or taken any other
action restraining, enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such judgment or other action shall have become final and non-appealable.
6.2. Effect of Termination. In the event of termination of this Agreement the

obligations in this Agreement with respect to the completion of the Closing shall forthwith
become void and of no further force or effect and there shall be no liability on the part of any
Party with respect thereto except that nothing herein shall relieve any Party from any liability
for damages for any breach of this Agreement.
7. Survival and Indemnification.
7.1. Survival. The representations and warranties in this Agreement shall survive
the Closing for a period of eighteen (18) months. The covenants in this Agreement shall
survive indefinitely.
7.2. Indemnification. Effective at and after the Closing, the Company hereby agrees
to indemnify and hold harmless RR and its controlled Affiliates and each of its and their
respective directors, officers, employees, agents, successors and assigns against and from any
and all damage, loss, liability and expense (including reasonable attorneys’ fees and expenses)
(collectively, “Losses”), incurred or suffered by such Persons arising out of any
misrepresentation or breach of warranty or breach of covenants by the Company under this
Agreement; provided that (i) the Company shall not be liable unless the aggregate amount of
Losses exceeds one percent (1%) of the Purchase Price then paid by RR to the Company, in
which case the Company shall be liable for all such Losses, and (ii) the Company’s maximum
liability shall not exceed the amount of the Purchase Price.
8. Miscellaneous.
8.1. Governing Law. This agreement shall be governed in all respects, including
without limitation validity, interpretation and effect, by the laws of the state of Delaware
applicable to contracts executed and to be performed wholly within such state without giving
effect to the choice of law principles of such state.
8.2. Dispute Resolution. The Parties agree that irreparable damage would occur in
the event any of the provisions of this Agreement were not performed in accordance with the
terms hereof and that such damage would not be adequately compensable in monetary
damages. Accordingly, the Parties hereto shall be entitled to an injunction or injunctions to
prevent breaches of this Agreement, to enforce specifically the terms and provisions of this
Agreement. Furthermore, each of the Parties hereto consents to submit itself to the exclusive
personal jurisdiction of the Court of Chancery or other federal or state courts of the State of
Delaware in the event any dispute arises out of this Agreement or the transactions contemplated
by this Agreement.
35
8.3. Waiver of Jury Trial. Each of the Parties hereto waives any right to request a
trial by jury in any litigation with respect to this Agreement.
8.4. Counterparts. This Agreement may be executed in two or more counterparts,

each of which shall be deemed an original, but all of which together shall constitute one and
the same instrument. This Agreement may also be executed and delivered by facsimile
signature and in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument.
8.5. Titles and Subtitles. The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this Agreement.
8.6. Amendments. Any term of this Agreement may be amended only with the
written consent of all the Parties.
8.7. Severability. In case any one or more of the provisions contained in this
Agreement is for any reason held to be invalid, illegal or unenforceable, such invalidity,
illegality, or unenforceability shall not affect any other provision of this Agreement, and such
invalid, illegal, or unenforceable provision shall be construed so that it will be valid, legal, and
enforceable to the maximum extent permitted by law.
8.8. No Assignment. No Party to this Agreement may assign its rights or delegate
its obligations under this Agreement, whether by operation of law or otherwise, and any
assignment in contravention hereof shall be null and void.
8.9. Entire Agreement. This Agreement and the other Transaction Documents
constitute the entire agreement between the Parties hereof with respect to the subject matter
hereof and thereof and supersede all prior agreements and understandings, both oral and
written, between the Parties with respect to the subject matter hereof and thereof.
8.10. Interpretation and Construction. Whenever the words “include,” “includes” and
“including” are used in this Agreement, they shall be deemed to be followed by the words
“without limitation.” The words “hereof, “herein” and “hereunder” and words of similar
import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. The word “will” shall be construed to have the same
meaning as the word “shall.” The definitions contained in this Agreement are applicable to the
singular as well as the plural forms of such terms. Any agreement, instrument, law, rule or
statute defined or referred to herein means, unless otherwise indicated, such agreement,
instrument, law, rule or statute as from time to time amended, modified or supplemented. Each
Party cooperated and participated in the drafting and preparation of this Agreement and the
documents referred to herein, and any and all drafts relating thereto exchanged between the
Parties shall be deemed the work product of all of the Parties and may not be construed against
any Party by reason of its drafting or preparation. Accordingly, any rule of law or any legal
decision that would require interpretation of any ambiguities in this Agreement against any
Party that drafted or prepared it is of no application and is hereby expressly waived by each of
the Parties hereto, and any controversy over interpretations of this Agreement shall be decided
without regards to events of drafting or preparation.
9.14. Further Assurances. The Parties shall execute and deliver all such further
instruments and documents and take all such other actions as may reasonably be required to
carry out the transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
[signature pages follow]
36
II. Frigaliment Importing Co. v. BNS International Sales Corp. (1960)
U. S. DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

OPINION: FRIENDLY
The issue is, what is chicken? Plaintiff says ‘chicken’ means a young chicken, suitable for
broiling and frying. Defendant says ‘chicken’ means any bird of that genus that meets contract
specifications on weight and quality, including what it calls ‘stewing chicken’ and plaintiff
pejoratively terms ‘fowl’. Dictionaries give both meanings, as well as some others not relevant
here. To support its [interpretation], plaintiff sends a number of volleys over the net; defendant
essays to return them and adds a few serves of its own. Assuming that both parties were acting
in good faith, the case nicely illustrates Holmes’ remark “that the making of a contract depends
not on the agreement of two minds in one intention, but on the agreement of two sets of external
signs, not on the parties’ having meant the same thing but on their having said the same thing.”
[...] I have concluded that plaintiff has not sustained its burden of persuasion that the contract
used ‘chicken’ in the narrower sense.
The action is for breach of the warranty that goods sold shall correspond to the description [...].
Two contracts are in suit. In the first, dated May 2, 1957, defendant, a New York sales
corporation, confirmed the sale to plaintiff, a Swiss corporation, of:
US Fresh Frozen Chicken, Grade A, Government Inspected,

Eviscerated, 2 ½ –3 lbs. and 1 ½ –2 lbs. each
all chicken individually wrapped in cryovac, packed in secured
fiber cartons or wooden boxes suitable for export
75,000 lbs. 2 ½-3 lbs........@$33.00
25,000 lbs. 1 ½-2 lbs........@$36.50
per 100 lbs. FAS New York scheduled May 10, 1957
The second contract, also dated May 2, 1957, was identical save that only 50,000 lbs. of the
heavier ‘chicken’ were called for, the price of the smaller birds was $37 per 100 lbs., and
shipment was scheduled for May 30 […]. When the initial shipment arrived in Switzerland,
plaintiff found, on May 28, that the 2 1/2-3 lbs. birds were not young chicken suitable for
broiling and frying but stewing chicken or ‘fowl’; indeed, many of the cartons and bags plainly
so indicated. Protests ensued. Nevertheless, shipment under the second contract was made on
May 29, the 2 1/2-3 lbs. birds again being stewing chicken. Defendant stopped the
transportation of these at Rotterdam. This action followed […].
Since the word ‘chicken’ standing alone is ambiguous, I turn first to see whether the contract
itself offers any aid to its interpretation. Plaintiff says the 1 1/2-2 lbs. birds necessarily had to
be young chickens since the older birds do not come in that size, hence the 2 1/2-3 lbs. birds
must likewise be young. This is unpersuasive – a contract for ‘apples’ of two different sizes
could be filled with different kinds of apples even though only one species came in both sizes.
Defendant notes that the contract called not simply for chicken but for ‘US Fresh Frozen
Chicken, Grade A, Government Inspected.’ It says the contract thereby incorporated by
reference the Department of Agriculture’s regulations, which favor its interpretation; I shall
return to this after reviewing plaintiff’s other contentions.
The first hinges on an exchange of cablegrams which preceded execution of the formal
contracts […]. Plaintiff stresses that, although these and subsequent cables between plaintiff
and defendant, which laid the basis for the additional quantities under the first and for all of the
second contract, were predominantly in German, they used the English word ‘chicken’; it
claims this was done because it understood ‘chicken’ meant young chicken whereas the
German word, ‘Huhn,’ included both ‘Brathuhn’ (broilers) and ‘Suppenhuhn’ (stewing
chicken), and that defendant, whose officers were thoroughly conversant with German, should
have realized this […].
37
Plaintiff’s next contention is that there was a definite trade usage that ‘chicken’ meant ‘young
chicken.’ […] Plaintiff endeavored to establish such a usage by the testimony of three witnesses
and certain other evidence. […] In addition to this opinion testimony, plaintiff relied on the
fact that the Urner-Barry service, the Journal of Commerce, and Weinberg Bros. & Co. of
Chicago, a large supplier of poultry, published quotations in a manner which, in one way or
another, distinguish between ‘chicken,’ comprising broilers, fryers and certain other categories,
and ‘fowl’ [...]. This material would be impressive if there were nothing to the contrary.
However, there was, as will now be seen. Defendant’s witness Weininger, who operates a
chicken eviscerating plant in New Jersey, testified ‘Chicken is everything except a goose, a
duck, and a turkey. Everything is a chicken, but then you have to say, you have to specify
which category you want or that you are talking about.’ […] Sadina, who conducts a food
inspection service, testified that he would consider any bird coming within the classes of
‘chicken’ in the Department of Agriculture’s regulations to be a chicken. […] [T]he
Department of Agriculture’s daily and weekly price reports avoid use of the word ‘chicken’
without specification […]. Defendant argues, as previously noted, that the contract
incorporated these regulations by reference. Plaintiff answers that the contract provision related
simply to grade and Government inspection and did not incorporate the Government definition
of ‘chicken,’ and also that the definition in the Regulations is ignored in the trade […].
Defendant makes a further argument based on the impossibility of its obtaining broilers and
fryers at the 33 cents price offered by plaintiff for the 2 1/2-3 lbs. birds. There is no substantial
dispute that, in late April, 1957, the price for 2 1/2-3 lbs. broilers was between 35 and 37 cents
per pound, and that when defendant entered into the contracts, it was well aware of this and
intended to fill them by supplying fowl in these weights […]. It is scarcely an answer to say,
as plaintiff does in its brief, that the 33 cents price offered [by plaintiff for] the 2 1/2-3 lbs.
‘chickens’ was closer to the prevailing 35 cents price for broilers than to the 30 cents at which
defendant procured fowl. Plaintiff must have expected defendant to make some profit –
certainly it could not have expected defendant deliberately to incur a loss.
Finally, defendant relies on conduct by the plaintiff after the first shipment had been received
[…]. Defendant argues that if plaintiff was sincere in thinking it was entitled to young chickens,
plaintiff would not have allowed the shipment under the second contract to go forward, since
the distinction between broilers and chickens drawn in defendant’s cablegram must have made
it clear that the larger birds would not be broilers. […]. [D]efendant argues that it was only
when plaintiff’s customers complained about this that plaintiff developed the idea that
‘chicken’ meant ‘young chicken.’ There is little force in this in view of plaintiff’s immediate
and consistent protests.
When all the evidence is reviewed, it is clear that defendant believed it could comply with the
contracts by delivering stewing chicken in the 2 1/2-3 lbs. size. Defendant’s subjective intent
would not be significant if this did not coincide with an objective meaning of ‘chicken.’ Here
it did coincide with one of the dictionary meanings, with the definition in the Department of
Agriculture Regulations to which the contract made at least oblique reference, with at least
some usage in the trade, with the realities of the market, and with what plaintiff’s spokesman
had said. Plaintiff asserts it to be equally plain that plaintiff’s own subjective intent was to
obtain broilers and fryers; the only evidence against this is the material as to market prices and
this may not have been sufficiently brought home. In any event it is unnecessary to determine
that issue. For plaintiff has the burden of showing that ‘chicken’ was used in the narrower
rather than in the broader sense, and this it has not sustained.
This opinion constitutes the Court’s findings of fact and conclusions of law.
Judgment shall be entered dismissing the complaint with costs.
38
III. MCC-Marble Ceramic Center, Inc. v. Ceramica Nuova D’Agostino, S.P.A. (1998)
UNITED STATES COURT OF APPEALS, ELEVENTH CIRCUIT
BIRCH, CIRCUIT JUDGE
This case requires us to determine whether a court must consider parole evidence in a contract
dispute governed by the [CISG]. The district court granted summary judgment on behalf of the
defendant-appellee, relying on certain terms and provisions that appeared on the reverse of a
pre-printed form contract for the sale of ceramic tiles. The plaintiff-appellant sought to rely on
a number of affidavits that tended to show both that the parties had arrived at an oral contract
before memorializing their agreement in writing and that they subjectively intended not to
apply the terms on the reverse of the contract to their agreements. The magistrate judge held
that the affidavits did not raise an issue of material fact and recommended that the district court
grant summary judgment based on the terms of the contract. The district court agreed with the
magistrate judge’s reasoning and entered summary judgment in the defendant-appellee’s favor.
We REVERSE.
BACKGROUND
The plaintiff-appellant, MCC-Marble Ceramic, Inc. (“MCC”), is a Florida corporation engaged

in the retail sale of tiles, and the defendant-appellee, Ceramica Nuova d’Agostino S.P.A.
(“D’Agostino”) is an Italian corporation engaged in the manufacture of ceramic tiles. In
October 1990, MCC’s president, Juan Carlos Mozon, met representatives of D’Agostino at a
trade fair in Bologna, Italy and negotiated an agreement to purchase ceramic tiles from
D’Agostino based on samples he examined at the trade fair. Monzon, who spoke no Italian,
communicated with Gianni Silingardi, then D’Agostino’s commercial director, through a
translator, Gianfranco Copelli, who was himself an agent of D’Agostino. The parties apparently
arrived at an oral agreement on the crucial terms of price, quality, quantity, delivery and
payment. The parties then recorded these terms on one of D’Agostino’s standard, pre-printed
order forms and Monzon signed the contract on MCC’s behalf. According to MCC, the parties
also entered into a requirements contract in February 1991, subject to which D’Agostino agreed
to supply MCC with high grade ceramic tile at specific discounts as long as MCC purchased
sufficient quantities of tile. MCC completed a number of additional order forms requesting tile
deliveries pursuant to that agreement [fn 2: Since this case is before us on summary judgment, we consider
the facts in the light most favorable to MCC, the non-moving party, and grant MCC the benefit of every factual
inference. See Welch v. Celotex Corp., 951 F.2d 1235, 1237 (11th Cir. 1992).]
MCC brought suit against D’Agostino claiming a breach of the February 1991 requirements
contract when D’Agostino failed to satisfy orders in April, May, and August of 1991. In
addition to other defenses, D’Agostino responded that it was under no obligation to fill MCC’s
orders because MCC had defaulted on payment for previous shipments. In support of its
position, D’Agostino relied on the pre-printed terms of the contracts that MCC had executed.
The executed forms were printed in Italian and contained terms and conditions on both the
front and reverse. According to an English translation of the October 1990 contract, the front
of the order form contained the following language directly beneath Monzon’s signature:
“[T]he buyer hereby states that he is aware of the sales conditions stated on the reverse and that
he expressly approves of them with special reference to those numbered 1-2-3-4-5-6-7-8.” R2-
126, Exh. 3 ¶ 5 (“Maselli Aff.”). Clause 6(b), printed on the back of the form states: “[D]efault
or delay in payment within the time agreed upon gives D’Agostino the right to . . . suspend or
cancel the contract itself and to cancel possible other pending contracts and the buyer does not
have the right to indemnification or damages.” Id. ¶ 6.
39
D’Agostino also brought a number of counterclaims against MCC, seeking damages for MCC’s
alleged nonpayment for deliveries of tile that D’Agostino had made between February 28, 1991
and July 4, 1991. MCC responded that the tile it had received was of a lower quality than
contracted for, and that, pursuant to the CISG, MCC was entitled to reduce payment in
proportion to the defects [fn 4: Article 50 of the CISG permits a buyer to reduce payment for nonconforming
goods in proportion to the nonconformity under certain conditions ]. D’Agostino, however, noted that
clause 4 on the reverse of the contract states, in pertinent part: “Possible complaints for defects
of the merchandise must be made in writing by means of a certified letter within and not later
than 10 days after receipt of the merchandise.” Maselli Aff. ¶ 6. Although there is evidence to
support MCC’s claims that it complained about the quality of the deliveries it received, MCC
never submitted any written complaints.
MCC did not dispute these underlying facts before the district court, but argued that the parties
never intended the terms and conditions printed on the reverse of the order form to apply to
their agreements. As evidence for this assertion, MCC submitted Monzon’s affidavit, which
claims that MCC had no subjective intent to be bound by those terms and that D’Agostino was
aware of this intent. MCC also filed affidavits from Silingardi and Copelli, D’Agostino’s
representatives at the trade fair, which support Monzon’s claim that the parties subjectively
intended not to be bound by the terms on the reverse of the order form. The magistrate judge
held that the affidavits, even if true, did not raise an issue of material fact regarding the
interpretation or applicability of the terms of the written contracts and the district court
accepted his recommendation to award summary judgment in D’Agostino’s favor. MCC then
filed this timely appeal.
DISCUSSION
We review a district court’s grant of summary judgment de novo and apply the same standards
as the district court. See Harris v. HW Contracting Co., 102 F.3d 516, 518 (11th Cir. 1996).
Summary judgment is appropriate when the pleadings, depositions, and affidavits reveal that
no genuine issue of material fact exists and the moving party is entitled to judgment as a matter
of law. See Fed.R.Civ.P. 56(c).
The parties to this case agree that the CISG governs their dispute because the United States,
where MCC has its place of business, and Italy, where D’Agostino has its place of business,
are both States Party to the Convention. See CISG, art. 1. Article 8 of the CISG governs the
interpretation of international contracts for the sale of goods and forms the basis of MCC’s
appeal from the district court’s grant of summary judgment in D’Agostino’s favor. MCC argues
that the magistrate judge and the district court improperly ignored evidence that MCC
submitted regarding the parties’ subjective intent when they memorialized the terms of their
agreement on D’Agostino’s pre-printed form contract, and that the magistrate judge erred by
applying the parole evidence rule in derogation of the CISG. [...]
I. Subjective Intent Under the CISG
Contrary to what is familiar practice in United States courts, the CISG appears to permit a
substantial inquiry into the parties’ subjective intent, even if the parties did not engage in any
objectively ascertainable means of registering this intent.
[fn 8: In the United States, the legislatures, courts, and the legal academy have voiced a preference for relying
on objective manifestations of the parties’ intentions. For example, Article Two of the Uniform Commercial Code,
which most states have enacted in some form or another to govern contracts for the sale of goods, is replete with
references to standards of commercial reasonableness. See e.g., U.C.C. § 2-206 (referring to reasonable means of
accepting an offer); see also Lucy v. Zehmer, 196 Va. 493, 503, 84 S.E.2d 516, 522 (1954) (“Whether the writing
signed . . . was the result of a serious offer . . . and a serious acceptance . . ., or was a serious offer . . . and an
acceptance in secret jest . . ., in either event it constituted a binding contract of sale between the parties.”). [...]]
40
Article 8(1) of the CISG instructs courts to interpret the “statements . . . and other conduct of
a party . . . according to his intent” as long as the other party “knew or could not have been
unaware” of that intent. The plain language of the Convention, therefore, requires an inquiry
into a party’s subjective intent as long as the other party to the contract was aware of that intent.
In this case, MCC has submitted three affidavits that discuss the purported subjective intent of
the parties to the initial agreement concluded between MCC and D’Agostino in October 1990.
All three affidavits discuss the preliminary negotiations and report that the parties arrived at an
oral agreement for D’Agostino to supply quantities of a specific grade of ceramic tile to MCC
at an agreed upon price. The affidavits state that the “oral agreement established the essential
terms of quality, quantity, description of goods, delivery, price and payment.” See R3-133 ¶ 9
(“Silingardi Aff.”); R1-51 ¶ 7 (“Copelli Aff.”); R1-47 ¶ 7 (“Monzon Aff.”). The affidavits also
note that the parties memorialized the terms of their oral agreement on a standard D’Agostino
order form, but all three affiants contend that the parties subjectively intended not to be bound
by the terms on the reverse of that form despite a provision directly below the signature line
that expressly and specifically incorporated those terms.
[fn 9: MCC makes much of the fact that the written order form is entirely in Italian and that Monzon, who signed
the contract on MCC’s behalf directly below this provision incorporating the terms on the reverse of the form,
neither spoke nor read Italian. This fact is of no assistance to MCC’s position. We find it nothing short of
astounding that an individual, purportedly experienced in commercial matters, would sign a contract in a foreign
language and expect not to be bound simply because he could not comprehend its terms. We find nothing in the
CISG that might counsel this type of reckless behavior and nothing that signals any retreat from the proposition
that parties who sign contracts will be bound by them regardless of whether they have read them or understood
them. See e.g., Samson Plastic Conduit and Pipe Corp. v. Battenfeld Extrusionstechnik GMBH, 718 F. Supp. 886,
890 (M.D. Ala. 1989) (“A good and recurring illustration of the problem . . . involves a person who is . . .
unfamiliar with the language in which a contract is written and who has signed a document which was not read to
him. There is all but unanimous agreement that he is bound.”)].
The terms on the reverse of the contract give D’Agostino the right to suspend or cancel all
contracts in the event of a buyer’s non-payment and require a buyer to make a written report
of all defects within ten days. As the magistrate judge’s report and recommendation makes
clear, if these terms applied to the agreements between MCC and D’Agostino, summary
judgment would be appropriate because MCC failed to make any written complaints about the
quality of tile it received and D’Agostino has established MCC’s non-payment of a number of
invoices amounting to $108,389.40 and 102,053,846.00 Italian lira.
Article 8(1) of the CISG requires a court to consider this evidence of the parties’ subjective
intent. Contrary to the magistrate judge’s report, which the district court endorsed and adopted,
article 8(1) does not focus on interpreting the parties’ statements alone. Although we agree
with the magistrate judge’s conclusion that no “interpretation” of the contract’s terms could
support MCC’s position [...], article 8(1) also requires a court to consider subjective intent
while interpreting the conduct of the parties. The CISG’s language, therefore, requires courts
to consider evidence of a party’s subjective intent when signing a contract if the other party to
the contract was aware of that intent at the time. This is precisely the type of evidence that
MCC has provided through the Silingardi, Copelli, and Monzon affidavits, which discuss not
only Monzon’s intent as MCC’s representative but also discuss the intent of D’Agostino’s
representatives and their knowledge that Monzon did not intend to agree to the terms on the
reverse of the form contract. This acknowledgment that D’Agostino’s representatives were
aware of Monzon’s subjective intent puts this case squarely within article 8(1) of the CISG,
and therefore requires the court to consider MCC’s evidence as it interprets the parties’ conduct.
[fn 11: Without this crucial acknowledgment, we would interpret the contract and the parties’ actions according
to article 8(2), which directs courts to rely on objective evidence of the parties’ intent. On the facts of this case it
seems readily apparent that MCC’s affidavits provide no evidence that Monzon’s actions would have made his
alleged subjective intent not to be bound by the terms of the contract known to “the understanding that a reasonable
person . . . would have had in the same circumstances.” CISG, art 8(2). ]
41
II. Parole Evidence and the CISG
Given our determination that the magistrate judge and the district court should have considered
MCC’s affidavits regarding the parties’ subjective intentions, we must address a question of
first impression in this circuit: whether the parole evidence rule, which bars evidence of an
earlier oral contract that contradicts or varies the terms of a subsequent or contemporaneous
written contract, plays any role in cases involving the CISG. We begin by observing that the
parole evidence rule, contrary to its title, is a substantive rule of law, not a rule of evidence.
See II E. Allen Farnsworth, Farnsworth on Contracts, § 7.2 at 194 (1990). The rule does not
purport to exclude a particular type of evidence as an “untrustworthy or undesirable” way of
proving a fact, but prevents a litigant from attempting to show “the fact itself — the fact that
the terms of the agreement are other than those in the writing.” Id. As such, a federal district
court cannot simply apply the parole evidence rule as a procedural matter — as it might if
excluding a particular type of evidence under the Federal Rules of Evidence, which apply in
federal court regardless of the source of the substantive rule of decision. Cf. id. § 7.2 at 196.
[fn 13: [...] The CISG provides that a contract for the sale of goods need not be in writing and that the parties
may prove the contract “by any means, including witnesses.” CISG, art. 11. Nevertheless, a party seeking to prove
a contract in such a manner in federal court could not do so in a way that violated in the rule against hearsay. See
Fed.R.Evid. 802 (barring hearsay evidence). A federal district court applies the Federal Rules of Evidence because
these rules are considered procedural, regardless of the source of the law that governs the substantive decision.
Cf. Farnsworth on Contracts § 7.2 at 196 n. 16 (citing cases).]
The CISG itself contains no express statement on the role of parole evidence. [...] It is clear,
however, that the drafters of the CISG were comfortable with the concept of permitting parties
to rely on oral contracts because they eschewed any statutes of fraud provision and expressly
provided for the enforcement of oral contracts. Compare CISG, art. 11 (a contract of sale need
not be concluded or evidenced in writing) with U.C.C. § 2-201 (precluding the enforcement of
oral contracts for the sale of goods involving more than $500). Moreover, article 8(3) of the
CISG expressly directs courts to give “due consideration . . . to all relevant circumstances of
the case including the negotiations . . .” to determine the intent of the parties. Given article
8(1)’s directive to use the intent of the parties to interpret their statements and conduct, article
8(3) is a clear instruction to admit and consider parole evidence regarding the negotiations to
the extent they reveal the parties’ subjective intent.
Despite the CISG’s broad scope, surprisingly few cases have applied the Convention in the
United States, see Delchi Carrier SPA v. Rotorex Corp., 71 F.3d 1024, 1027-28 (2d Cir. 1995)
(observing that “there is virtually no case law under the Convention”), and only two reported
decisions touch upon the parole evidence rule, both in dicta.
One court has concluded, much as we have above, that the parole evidence rule is not viable in
CISG cases in light of article 8 of the Convention. In Filanto, a district court addressed the
differences between the UCC and the CISG on the issues of offer and acceptance and the battle
of the forms. See 789 F. Supp. at 1238. After engaging in a thorough analysis of how the CISG
applied to the dispute before it, the district court tangentially observed that article 8(3)
“essentially rejects . . . the parole evidence rule.” Id. at 1238 n. 7.
Another court, however, appears to have arrived at a contrary conclusion. In Beijing Metals
Minerals Import/Export Corp. v. American Bus. Ctr., Inc., 993 F.2d 1178 (5th Cir. 1993), a
defendant sought to avoid summary judgment on a contract claim by relying on evidence of
contemporaneously negotiated oral terms that the parties had not included in their written
agreement. The plaintiff, a Chinese corporation, relied on Texas law in its complaint while the
defendant, apparently a Texas corporation, asserted that the CISG governed the dispute. Id. at
1183 n. 9. Without resolving the choice of law question, the Fifth Circuit cited Filanto for the
proposition that there have been very few reported cases applying the CISG in the United
42
States, and stated that the parole evidence rule would apply regardless of whether Texas law
or the CISG governed the dispute. Beijing Metals, 993 F.2d at 1183 n. 9. The opinion does not
acknowledge Filanto’s more applicable dictum that the parole evidence rule does not apply to
CISG cases nor does it conduct any analysis of the Convention to support its conclusion. In
fact, the Fifth Circuit did not undertake to interpret the CISG in a manner that would arrive at
a result consistent with the parole evidence rule but instead explained that it would apply the
rule as developed at Texas common law. See id. at 1183 n. 10. As persuasive authority for this
court, the Beijing Metals opinion is not particularly persuasive on this point.
Our reading of article 8(3) as a rejection of the parole evidence rule, however, is in accordance
with the great weight of academic commentary on the issue. As one scholar has explained:
“[T]he language of Article 8(3) that “due consideration is to be given to all relevant
circumstances of the case” seems adequate to override any domestic rule that would bar a
tribunal from considering the relevance of other agreements. . . . Article 8(3) relieves tribunals
from domestic rules that might bar them from “considering” any evidence between the parties
that is relevant. This added flexibility for interpretation is consistent with a growing body of
opinion that the “parole evidence rule” has been an embarrassment for the administration of
modern transactions.” Honnold, Uniform Law § 110 at 170-71.
Indeed, only one commentator has made any serious attempt to reconcile the parole evidence
rule with the CISG. [...] Moore argues that the parole evidence rule often permits the admission
of evidence discussed in article 8(3), and that the rule could be an appropriate way to discern
what consideration is “due” under article 8(3) to evidence of a parole nature. Id. at 1361-63.
He also argues that the parole evidence rule, by limiting the incentive for perjury and pleading
prior understandings in bad faith, promotes good faith and uniformity in the interpretation of
contracts and therefore is in harmony with the principles of the CISG, as expressed in article
7. Id. at 1366-70. The answer to both these arguments, however, is the same: although
jurisdictions in the United States have found the parole evidence rule helpful to promote good
faith and uniformity in contract, as well as an appropriate answer to the question of how much
consideration to give parole evidence, a wide number of other States Party to the CISG have
rejected the rule in their domestic jurisdictions. One of the primary factors motivating the
negotiation and adoption of the CISG was to provide parties to international contracts for the
sale of goods with some degree of certainty as to the principles of law that would govern
potential disputes and remove the previous doubt regarding which party’s legal system might
otherwise apply. [...] Courts applying the CISG cannot, therefore, upset the parties’ reliance on
the Convention by substituting familiar principles of domestic law when the Convention
requires a different result. We may only achieve the directives of good faith and uniformity in
contracts under the CISG by interpreting and applying the plain language of article 8(3) as
written and obeying its directive to consider this type of parole evidence.
This is not to say that parties to an international contract for the sale of goods cannot depend
on written contracts or that parole 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 pre-printed
writing. In most cases, therefore, article 8(2) of the CISG will apply, and objective evidence
will provide the basis for the court’s decision. See Honnold, Uniform Law § 107 at 164-65.
Consequently, a party to a contract governed by the CISG will not be able to avoid the terms
of a contract and force a jury trial simply by submitting an affidavit which states that he or she
did not have the subjective intent to be bound by the contract’s terms. Cf. Klopfenstein v.
Pargeter, 597 F.2d 150, 152 (9th Cir. 1979) (affirming summary judgment despite the
appellant’s submission of his own affidavit regarding his subjective intent: “Undisclosed,
subjective intentions are immaterial in [a] commercial transaction, especially when
contradicted by objective conduct. Thus, the affidavit has no legal effect even if its averments
43
are accepted as wholly truthful.”). Moreover, to the extent parties wish to avoid parole evidence
problems they can do so by including a merger clause in their agreement that extinguishes any
and all prior agreements and understandings not expressed in the writing.
Considering MCC’s affidavits in this case, however, we conclude that the magistrate judge and
the district court improperly granted summary judgment in favor of D’Agostino. Although the
affidavits are, as D’Agostino observes, relatively conclusory and unsupported by facts that
would objectively establish MCC’s intent not to be bound by the conditions on the reverse of
the form, article 8(1) requires a court to consider evidence of a party’s subjective intent when
the other party was aware of it, and the Silingardi and Copelli affidavits provide that evidence.
This is not to say that the affidavits are conclusive proof of what the parties intended. A
reasonable finder of fact, for example, could disregard testimony that purportedly sophisticated
international merchants signed a contract without intending to be bound as simply too
incredible to believe and hold MCC to the conditions printed on the reverse of the contract.
Nevertheless, the affidavits raise an issue of material fact regarding the parties’ intent to
incorporate the provisions on the reverse of the form contract. If the finder of fact determines
that the parties did not intend to rely on those provisions, then the more general provisions of
the CISG will govern the outcome of the dispute. [...]
MCC’s affidavits, however, do not discuss all of the transactions and orders that MCC placed
with D’Agostino. Each of the affidavits discusses the parties’ subjective intent surrounding the
initial order MCC placed with D’Agostino in October 1990. The Copelli affidavit also
discusses a February 1991 requirements contract between the parties and reports that the parties
subjectively did not intend the terms on the reverse of the D’Agostino order form to apply to
that contract either. See Copelli Aff. ¶ 12. D’Agostino, however, submitted the affidavit of its
chairman, Vincenzo Maselli, which describes at least three other orders from MCC on form
contracts dated January 15, 1991, April 27, 1991, and May 4, 1991, in addition to the October
1990 contract. See Maselli Aff. ¶ 2, 25. MCC’s affidavits do not discuss the subjective intent
of the parties to be bound by language in those contracts, and D’Agostino, therefore, argues
that we should affirm summary judgment to the extent damages can be traced to those order
forms. It is unclear from the record, however, whether all of these contracts contained the terms
that appeared in the October 1990 contract. Moreover, because article 8 requires a court to
consider any “practices which the parties have established between themselves, usages and any
subsequent conduct of the parties” in interpreting contracts, CISG, art. 8(3), whether the parties
intended to adhere to the tenday limit for complaints, as stated on the reverse of the initial
contract, will have an impact on whether MCC was bound to adhere to the limit on subsequent
deliveries. Since material issues of fact remain regarding the interpretation of the remaining
contracts between MCC and D’Agostino, we cannot affirm any portion of the district court’s
summary judgment in D’Agostino’s favor.
CONCLUSION
MCC asks us to reverse the district court’s grant of summary judgment in favor of D’Agostino.
The district court’s decision rests on pre-printed contractual terms and conditions incorporated
on the reverse of a standard order form that MCC’s president signed on the company’s behalf.
Nevertheless, we conclude that the CISG, which governs international contracts for the sale of
goods, precludes summary judgment in this case because MCC has raised an issue of material
fact concerning the parties’ subjective intent to be bound by the terms on the reverse of the pre-
printed contract. The CISG also precludes the application of the parole evidence rule, which
would otherwise bar the consideration of evidence concerning a prior or contemporaneously
negotiated oral agreement. Accordingly, we REVERSE the district court’s grant of summary
judgment and REMAND this case for further proceedings consistent with this opinion.
44

Reading Materials - Classes 6, 7 and 8 - Drafting and Interpretation

Încărcat de

Informații document

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Reading Materials - Classes 6, 7 and 8 - Drafting and Interpretation

Încărcat de

Drepturi de autor:

Formate disponibile

INTRODUCTION TO

AMERICAN CONTRACT LAW

READING MATERIALS FOR

Course lecturer: Lect. univ. dr. Raluca Papadima, Esq.

Dr. Raluca Papadima, Esq. is a member of the

Ms. Papadima graduated from the Faculty of

Ms. Papadima is an Assistant Professor at the

Ms. Papadima worked as an attorney

Question 1: Find as many drafting errors as you can.

Art. 44 Dispute Resolution

Art. 45 Final Provisions

Art. 46 Standard Terms

Section 1 Cooperation between Parties

Section 2 Limitation of Liability

Section 21 Dispute Resolution

Section 22 Choice of Law

CHAPTER 2 : CONTRACT INTERPRETATION

I. General Rules of Contract Interpretation: Restatement (Second) of Contracts

Chapter 9 (The Scope of Contractual Obligations)

§ 201. Whose Meaning Prevails

§ 202. Rules in Aid of Interpretation

§ 203. Standards of Preference in Interpretation

§ 204. Supplying an Omitted Essential Term

§ 205. Duty of Good Faith and Fair Dealing

§ 206. Interpretation Against the Draftsman

§ 208. Unconscionable Contract or Term

§ 209. Integrated Agreements

§ 210. Completely and Partially Integrated Agreements

§ 211. Standardized Agreements

§ 213. Effect of Integrated Agreement on Prior Agreements (Parol Evidence Rule)

§ 214. Evidence of Prior or Contemporaneous Agreements and Negotiations

§ 215. Contradiction of Integrated Terms

§ 216. Consistent Additional Terms

§ 217. Integrated Agreement Subject to Oral Requirement of a Condition

§ 220. Usage Relevant to Interpretation

§ 221. Usage Supplementing an Agreement

§ 223. Course of Dealing

§ 224. Condition Defined

§ 225. Effects of the Non-Occurrence of a Condition

§ 226. How an Event May Be Made a Condition

§ 227. Standards of Preference with Regard to Conditions

§ 228. Satisfaction of the Obligor as a Condition

§ 229. Excuse of a Condition to Avoid Forfeiture

A. Sphere of application of Article 2 UCC

Article 2 UCC applies to contracts for the sale of goods to or by a merchant.

B. Contract formation and interpretation

§ 2-201. Formal Requirements; Statute of Frauds

2. Methods of Contract Formation and Battle of Forms

§ 2-204. Formation in General

§ 2-205. Firm Offers

§ 2-206. Offer and Acceptance in Formation of Contract

(1) Unless otherwise unambiguously indicated by the language or circumstances

§ 2-207. Additional Terms in Acceptance or Confirmation

2. Course of Performance, Course of Dealing, and Usage of Trade

Course of performance is a sequence of conduct between the parties to a particular transaction.

Course of dealing is a sequence of conduct concerning previous transactions between the

§ 1-303. Course of Performance, Course of Dealing, and Usage of Trade

(a) A “course of performance” is a sequence of conduct between the parties to a particular

(f) Subject to Section 2-209, a course of performance is relevant to show a waiver or

§ 2-208. Course of Performance or Practical Construction

§ 2-209. Modification, Rescission and Waiver

§ 2-305. Open Price Term

§ 2-306. Output, Requirements and Exclusive Dealings