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By: Timothy Murray, Murray Hogue and Lannis
ONE TIME I FOUND MYSELF IN A BREACH OF CONTRACT TRIAL before a grizzled jurist who seemed to have as much familiarity with contract law as I have with high fashion (none). I would like to say that he compensated for this deficiency with street smarts and a courteous judicial temperament, except it wouldn’t be true.
The attorneys were arguing some point of law, and I’m not sure what prompted it, but the judge suddenly emitted a full-throated roar that I would have mistaken for thunder if I hadn’t seen his lips moving.
“Judges don’t bother with the rules of contract law!”
I could not have been more astounded if the judge had started doing a puppet show from the bench. He proceeded to sermonize that judges resolve contract law questions by relying on instinct, which “usually” matches the textbooks.
I was only glad that Professor Corbin wasn’t there. This might have killed him all over again.
The case settled shortly after that, and it’s anyone’s guess whether that judge’s rulings would have matched the textbooks. The judge was simply wrong, to put it charitably—the vast majority of judges do bother with the rule of law (though most aren’t as comfortable with contract law as the practicing bar assumes). But his other-worldly musings did contain a sobering kernel of truth: the demands on the time of the judiciary and the practicing bar too often force us to rely on instinct more than we’d prefer. Of course, few of us brazenly celebrate that reality as this judge did.
In many years of practicing commercial law, and of updating and revising the Corbin on Contracts treatise, I have found that there are certain concepts in modern contract law that every attorney should know but that many do not. The following are some of the most important.
The failure to appreciate this difference can be disastrous for our clients. Every breach, big and small, entitles the aggrieved party to sue and to potentially recover damages, but only a material breach—one that goes to the essence of a contract1—“discharges the non-breaching party from its duties under the contract.”2
Until a court declares that the breach was material, an aggrieved party will not know for certain whether that party may be discharged from its obligations under the contract. A judicial determination of that question could take months and even years.3 If the aggrieved party stops performing its obligations without a judicial declaration of material breach, and if it later turns out that there was no material breach, then the aggrieved party itself has committed a material breach.4
But determining whether a breach was material is often as clear as a fog off the coast of Maine. “[T]he ‘materiality’ of any alleged breach is a question of fact,”5 and only where the facts are undisputed should the court decide the matter on its own.6 To determine whether a breach was material, many courts hold that the fact finder should apply the factually intense, five-prong test of Section 241 of the Restatement (Second) of Contracts.7 One of those factors even requires the fact finder to consider the breaching party’s good faith—a rare departure from the principle that “[c]ontract liability is strict liability,” and a party is responsible for a breach even if that party was without fault.8
A client aggrieved by a breach may not appreciate its attorney’s caution that the client should not blithely treat the contract as cancelled.9 Careful contract drafting can avoid some of the uncertainty by spelling out events that warrant cancellation of the contract and that allow the aggrieved party to be discharged from further contractual obligations.10 This requires a conversation with the client to decide which breaches will make continuation of the contract intolerable. The client might need to be prodded on this issue since clients generally are more concerned about dickered terms—that’s what the UCC’s principal drafter Karl Llewellyn called the commercial terms that the parties actually bargain—and less about the boilerplate, which generally is riddled with legalese and deals with what happens if something goes wrong (clients generally are more optimistic than lawyers). Drafting should spell out those intolerable events with clarity—no court has ever complained that a contract is too clear. The provision should include a catch-all spelling out that dissimilar events otherwise constituting material breaches also warrant cancellation and discharge.
Generally, “[e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement.” Few concepts in our jurisprudence are invoked as frequently as the implied covenant of good faith and fair dealing,11 yet it “is rarely successfully invoked.”12 It is little wonder that it is raised so frequently—"courts’ descriptions of it often are larded with nebulous legal platitudes and fluff that can be contorted to mean whatever a litigant wants them to mean.”13 For example, judicial opinions suggest that “evasion of the spirit of the bargain” constitutes a breach of the covenant, but that description is far too broad to be helpful—it “affords triers of fact carte blanche to concoct a contract from whole cloth based not on the parties’ actual bargain but on the ‘spirit’ of their bargain, whatever that means.”14 When it comes to actual rulings, however, courts usually apply the covenant sparingly. To use it where it is not appropriate weakens the force of legitimate claims.15
When is it appropriately invoked? The covenant usually is applied only where there is an express “contractual provision [that] allows a party discretion in the manner of its performance . . . .”16 The discretion must be exercised in good faith. In addition, “[t]he duty of good faith includes a duty to cooperate whenever cooperation is necessary for performance of the contract.”17
The “covenant is not untethered from the parties’ express contract,”18 and it “does not exist ‘in the air’”19 as “a ‘free-floating duty’ separate from a contract.”20 “When a party does what the contract expressly allows it to do, there can be no breach of the implied covenant of good faith because the covenant does not override express contract terms.”21
There are also contracts where a party’s performance is measured by the other’s satisfaction. These come in two varieties: where satisfaction is dependent on a party’s personal taste or feelings and where satisfaction is dependent on criteria that can be objectively measured. For the former, the party to be satisfied must only act honestly; for the latter, that party must act honestly and reasonably.22
This is another case of overuse.23 This canon “applies ‘only as a last resort’ when the meaning of a provision remains ambiguous after exhausting the ordinary methods of interpretation.”24 Where there is an ambiguity, a court is supposed to consider extrinsic evidence to discern the parties’ intentions before resorting to this canon.25
When is it appropriately used? “[T]he ‘contra proferentem’ canon is meant primarily for cases ‘where the written contract is standardized and between parties of unequal bargaining power.’”26 Where an agreement is not a nonnegotiable contract of adhesion, and the parties are sophisticated commercial entities represented by counsel throughout the negotiations, it is most unlikely that a court will apply contra proferentem.
A preliminary agreement—such as a letter of intent—is one where parties agree on some matters under negotiation but intend to execute another, more formal writing that will contain additional terms. These documents generally do not result in a binding contract, but that is not always the case. “Documents that typically are not intended to reach the parties’ ultimate contractual objective—including letters of intent and proposals—can, in fact, be legally operative contracts that do just that.”27
One time, an attorney asked me to explain the difference between a letter of intent and a memorandum of understanding. I advised that he should forget attributing much significance to the labels employed—letters of intent, memoranda of understanding, term sheets are not terms of art and do not have universally accepted meanings.28 A document could call itself a ham sandwich and still be a binding contract depending on the substance (though I’d hesitate to enter into a deal with someone who would call a contract a ham sandwich).
A preliminary agreement is a binding agreement on the ultimate contractual objective if the parties agree on all essential terms and if neither party understands that the other intends to delay contract formation until something else happens (the something else can be a more formal written memorial of the deal, obtaining approval from someone higher up in the company, or anything else).29 Even if the parties to a preliminary agreement understand that they will have a more formal written document, that intention will not prevent or delay contract formation where the parties have agreed on all essential terms—unless one party conditions contract formation on having a more formal document.30
Parties generally can enter into the contract of their choosing. This maxim is so firmly embedded in the DNA of our jurisprudence, it is easy to overlook the prominent exceptions. Here are a half- dozen examples:
The duty to read means that parties are bound by contracts to which they have given their assent even if they did not bother to read them.44 It is a foundational concept in contract law—so well-accepted that judicial decisions rarely mention it except in passing. But it has never been more important than in the 21st century.
Our lives are an endless stream of contracts of adhesion. “Most contracts are contracts of adhesion”45— non-negotiable (take-it-or-leave-it) and standardized.46 When consumers take out a loan, sign up for a credit card, buy or rent a car, check into a hotel, sign a waiver to go skiing, or do any number of other things, they are presented with a contract of adhesion, and there is no haggling over its terms—the buyer either agrees to it or there is no deal. Most people do not bother to read adhesion contracts since they cannot bargain over them anyway. But the law does not care—if you sign it, generally you are bound by all its terms, because you had a duty to read it. Despite a pervasive wariness about adhesion contracts, they “are generally enforced.”47 Judge Frank H. Easterbrook of the U.S. Court of Appeals for the Seventh Circuit went so far as to ask rhetorically, “But what's wrong with a contract of adhesion anyway?”48 The duty to read makes adhesion contracts possible.
But things got complicated with internet contracts. Website owners who want users to be bound by their contractual provisions (including arbitration provisions) typically do not put the terms on the webpage that the user must access to use the site. The terms can be accessed by a hyperlink that takes the user to another webpage. This is a classic example of a contractual term found in a non-contractual place: a website does not look, feel, or smell like a contract—and, importantly, there is no duty to read a non-contractual document.49 The website owner wishing to bind the other party to its terms must create a duty to read. In many cases, website owners fail to do that.
Courts have held that the user is not bound by the website owner’s contractual terms because (1) the user did not actually see them and was not on inquiry notice of them (often the hyperlink is below the order button and the user would have no reason to scroll down to it,50 or the hyperlink is inconspicuous because of clutter—it gets lost in a sea of other information on the webpage51) or (2) the website did not clearly indicate that the user’s continued use of the site constitutes the user’s assent to the hyperlinked terms.52 These deficiencies are remedied by ensuring that the design and content of the website creates a duty to read the terms—by putting the user on inquiry notice of the hyperlinked terms and by making clear that continued use of the site will bind the user to the critical, hyperlinked legal terms.
The most common exclusion of damages is a provision excluding consequential damages. “Consequential damages are defined as ‘[s]uch damage, loss or injury as does not flow directly and immediately from the act of the party, but only from some of the consequences or results of such act.’”53 Sellers generally try to exclude consequential damages because they can be far more substantial than direct damages. But merely including a provision excluding consequential damages may not exclude the damages that the drafter anticipates.
First, there is no universal agreement as to what constitutes consequential damages. “The term ‘consequential damages’ is subject to multiple interpretations, and ‘no two courts or treatises define consequential damages the same way.’”54 It is not always clear whether a category of damages falls in the direct or consequential damages bucket, and “when courts seek to discern whether damages are direct or consequential, they often grope for bright lines where there are none.”55 Where possible, it is best to actually spell out categories of damages to be excluded.
Second, lost profits are sometimes called “the ‘quintessential example of consequential damages.’”56 But, in fact, some lost profits are direct damages.57 Merely excluding consequential damages will not exclude these damages.
Third, in a sale of goods setting, when an exclusive remedy set forth in a contract fails of its essential purpose (e.g., when the seller does not cure or correct the deficiencies of an exclusive remedy), the law makes available to the buyer the entire panoply of remedies under Article 2 of the UCC.58 In that scenario, if the contract contains an exclusion of consequential damages, some courts say that even the exclusion is disregarded.59
Fourth, in rare instances, courts hold that direct damages alone do not allow an aggrieved buyer a fair quantum of remedy, so courts will disregard an exclusion of consequential damages.60
Certain invisible terms actually become part of the parties’ contract: trade usage,61 course of dealing,62 and course of performance.63 “‘Agreement’ . . . means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade . . . .”64 This evidence may explain—and even supplement—the contract.65
What does that mean? It means that evidence of these matters is admissible regardless of whether anything in the contract is said about them, and regardless of whether the contract has a merger clause that excludes evidence of prior or contemporaneous agreements that are not included in the contract. Trade usage and course of dealing may be admitted despite the parol evidence rule, even for completely integrated agreements.66 Course of performance is not subject to the parol evidence rule at all since it involves post-formation conduct.67
The UCC allows parties to “carefully negate” trade usage and course of dealing.68 This requires words in addition to the usual merger clause.69 Course of performance technically cannot be negated since it involves conduct that occurs post-contract formation.70
Integration and interpretation serve two different purposes. Integration is the process to determine which terms are part of the contract; interpretation is the process used to determine what those terms mean.71 When the parties have entered into a written agreement but one of the parties wants to introduce evidence of a prior written or oral agreement, the court has to decide whether that prior agreement is admissible. It does this by deciding whether the subsequent written agreement is completely or partially integrated.
If the prior agreement contradicts the later one, the parol evidence rule mandates that the prior agreement is excluded. Those are the easy cases. “The difficult cases—the ones that are more likely to erupt into litigation—are those where there is no contradiction between the prior agreement and the subsequent written contract. Determining whether the prior agreement is admissible hinges on whether the subsequent written contract is completely or partially integrated.”72
A partially integrated agreement is intended by the parties as a final expression of some but not all terms of their agreement. It discharges the parts of prior or contemporaneous agreements that contradict the subsequent writing, but not the parts that contain consistent additional terms. A completely integrated agreement is intended by the parties as a complete and exclusive statement of the terms of the agreement. Not only does it discharge the contradictory parts of prior or contemporaneous agreements, it discharges any prior or contemporaneous agreements that are within the scope of the agreement.73
Courts use different tests to determine whether an agreement is completely integrated. Many courts employ the natural omission test: would reasonable parties in this situation naturally and normally include the terms of the prior agreement in the subsequent written document? If so, the subsequent writing is completely integrated, and the prior agreement is inadmissible. If not, the subsequent written agreement is only partially integrated, and the prior agreement is admissible.74 Courts also employ the separate consideration test—if the prior agreement was agreed to for separate consideration, the subsequent written agreement is only partially integrated and the prior agreement is admissible.75 Some courts follow the appearance test where the court decides just by looking at the agreement whether it is a complete expression of the whole agreement.76
Sound confusing? It is confusing. Much of the confusion can be alleviated by including a merger or integration clause in the contract to manifest the parties’ intent to be bound only by the terms of their final writing. “A merger clause can act as a sort of silver bullet that automatically transforms a partially integrated agreement into a completely integrated agreement.”77 Not all jurisdictions regard merger clauses as conclusive.78
A garden variety merger clause generally does not preclude evidence of fraud, but some courts hold that if the contract contains an anti-reliance clause stating that the parties did not rely upon extra-contractual representations, claims of fraud in the inducement may be barred.79 Some courts hold that the non-reliance disclaimer must specifically track the alleged misrepresentation in order to exclude evidence of the fraud.80
Only after the parties figure out the terms of the agreement by determining these integration questions should the court interpret the agreement. That is an entire article unto itself.
A staggering number of transactions for the sale of goods occur without having a document signed by both parties. A common scenario: the parties agree on essential business terms (description of the goods, quantity, price, and delivery terms). The buyer makes an offer to buy by sending seller its purchase order form with the essential business terms on the front and small print boilerplate terms and conditions on the back. The seller sends its acceptance via an acknowledgement form that mirrors the essential business terms on the buyer’s form but includes its own—very different—boilerplate “terms and conditions” on the back (e.g., the seller’s form almost always disclaims implied warranties and excludes consequential damages). Then the seller ships the goods, and the buyer accepts them.
In the vast majority of these transactions, there is no problem, and if there is, the parties work it out amicably. But sometimes a dispute arises that leads to a legal action. Whose terms prevail in that scenario? This is the mind-boggling part: it’s not possible for both sets of terms to be the contract. Do the lawyers who draft these terms and conditions ever explain that to the client? I’ve had this discussion with in-house counsel—one general counsel of a large company looked at me as if I had just told him that I saw Elvis at the grocery store. I guess it was too astonishing to believe.
For the scenario noted above, prior to the UCC, there was no contract based on the exchange of the forms because the boilerplate terms did not match. The contract was formed when the seller shipped and the buyer accepted the goods, and the terms were those of the party who sent the last set of terms (usually the seller). The UCC changed all that with § 2-207. Now, the law recognizes a contract at the time the non-matching forms are exchanged. But § 2-207 does a terrible job explaining which set of terms apply—§ 2-207 was “a miserable, bungled, patched-up job”81 that “has cut a jaw-dropping swath of confusion that has confounded the commercial bar for decades.”82
Under the scenario discussed above, if the essential terms match, there is a contract.83 But what are the terms? Here is the explanation—kindly do not blame me if you think that it makes no sense: the seller’s additional terms become part of the contract unless the buyer’s form “expressly limits acceptance to the terms of the offer”84 or the buyer otherwise provides notice of objection to the terms.85 If the buyer fails to do either of those things, the seller’s additional terms become part of the contract unless they materially alter the buyer’s terms.86 What about the seller’s terms that are different and not additional? The UCC forgot to tell us what to do about those, and this has generated mass confusion with a lot of states adopting the so-called knockout rule—expressly different terms are knocked out.87 The seller can still make a counter-offer if it tracks the language of § 2-207 and “acceptance is expressly made conditional on assent to the additional or different terms.”88 If that happens, and the parties proceed to perform anyway (they almost always do), the terms are those on which the writings agree, “together with any supplementary terms incorporated under any other provisions of this Act”89—which means that the pro-buyer remedies and implied warranties provisions of the UCC become part of the contract. The bottom line: if the buyer is the offeror (and good luck controlling which party is the offeror in a given case), and if the buyer drafts its boilerplate terms correctly, in most jurisdictions, it can usually win the battle of the forms (at least for important things such as ensuring that the contract has no exclusion of consequential damages and disclaimer of implied warranties).
This is the most complex area in all of contract law, and even a comprehensive explanation is confusing beyond all reckoning. This area has spawned an astonishing amount of litigation—and courts routinely botch the resolution of questions concerning it. Will it ever change? Not until the legislatures do something about it or until in-house counsel better appreciate that when their clients do business this way, it is anyone’s guess whether their contractual terms will govern. That is a very risky way to do business.
Timothy Murray, a partner in the Pittsburgh, PA law firm Murray, Hogue & Lannis, writes the biannual supplements to Corbin on Contracts, is author of Volume 1, Corbin on Contracts (rev. ed. 2018), and is co-author of the Corbin on Contracts Desk Edition (2017).
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> SALE OF GOODS AGREEMENTS: AVOIDING COMMON PITFALLS
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1. Timp v. Gibbs, 2020 Minn. App. LEXIS 229 (Aug. 10, 2020). 2. Travelers Cas. & Sur. Co. of Am. v. Harlingen Consol. Indep. Sch. Dist., 2018 U.S. Dist. LEXIS 221032, *14 (S.D. Tex. Nov. 2, 2018). See Gas Sensing Tech. Corp. v. New Horizon Ventures PTY LTD, 2020 WY 114 (2020). 3. See, e.g., http://uscourts.gov/Statistics/FederalCourtManagementStatistics.aspx. 4. See Coleman v. DeSteph, 2015 N.H. LEXIS 218, *1-2 (Oct. 14, 2015) (“The refusal of a party to perform under a contract in response to a breach that is not material is itself a material breach of the contract.”); Ryko Mfg. Co. v. Eden Servs., 823 F.2d 1215, 1239 (8th Cir. 1987) (“[A] jury reasonably could conclude that Eden's conduct did not constitute a material breach of the distributorship contract and that Ryko's termination of Eden therefore was itself a material breach of the contract.”). 5. Ozone Int'l, LLC v. Wheatsheaf Grp. Ltd., 2020 U.S. Dist. LEXIS 80008, *9 (W.D. Wash. May 6, 2020). See ShermansTravel Media, LLC v. Gen3Ventures, LLC, 2020 Ind. App. LEXIS 314 (July 27, 2020). 6. Dalrymple v. Winthrop, 97 Mass. App. Ct. 547 (2020). 7. Steven W. Feldman, Rescission, Restitution, and the Principle of Fair Redress: A Response to Professors Brooks and Stremitzer, 47 Val. U.L. Rev. 399, 425 (2013) (“Many courts cite with approval section 241's five factors . . . .”); Int'l Diamond Imps., Ltd. v. Singularity Clark, L.P., 2012 PA Super. 71(2012) (“The trial court abused its discretion . . . in omitting to evaluate the materiality of Appellants' alleged breach according to the factors prescribed by Restatement (Second) of Contracts § 241.”). The Restatement (Second) of Contracts § 241 provides that these five factors are significant: (a) the extent to which the injured party will be deprived of the benefit which he reasonably expected; (b) the extent to which the injured party can be adequately compensated for the part of that benefit of which he will be deprived; (c) the extent to which the party failing to perform or to offer to perform will suffer forfeiture; (d) the likelihood that the party failing to perform or to offer to perform will cure his failure, taking account of all the circumstances including any reasonable assurances; (e) the extent to which the behavior of the party failing to perform or to offer to perform comports with standards of good faith and fair dealing. 8. Restatement (Second) of Contracts, Ch. 11 Introductory Note. 9. The Uniform Commercial Code (UCC) calls this cancellation, not termination: “‘Cancellation’ occurs when either party puts an end to the contract for breach by the other,” UCC § 2-106(4), while “‘[t]ermination’ occurs when either party pursuant to a power created by agreement or law puts an end to the contract otherwise than for its breach.” UCC § 2-106(3). 10. Cmty. Alts. Va. v. Jones, 2018 Va. App. LEXIS 215, *6 (Aug. 7, 2018) (“[T]he default rule of material breach can be displaced by the parties' agreement.”). Even otherwise nonmaterial breach can be included as events warranting discharge. 11. “‘Good faith and fair dealing’ is one of the most commonly used phrases in the legal lexicon, yet the conceptual framework behind it is incredibly abstract and has yet to be precisely defined.” Monica E. White, "Package Deal": The Curious Relationship Between Fiduciary Duties and the Implied Covenant of Good Faith and Fair Dealing in Delaware Limited Liability Companies, 21 U. Miami Bus. L. Rev. 111, 127 (2013). 12. vMedex, Inc. v. TDS Operating, Inc., 2020 U.S. Dist. LEXIS 152059, *23 (D. Del. Aug. 21, 2020). 13. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 26.02 (2019). 14. Id. 15. See Bayer Chems. Corp. v. Albermarle Corp., 171 F. App'x 392, 398, n. 10 (3d Cir. 2006). 16. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 26.02 (2019). 17. Id. 18. Id. 19. Johnson Enters. of Jacksonville v. FPL Grp., 162 F.3d 1290, 1314 (11th Cir. 1998). 20. Blaustein v. Lord Balt. Capital Corp., 2012 Del. Ch. LEXIS 126, at *9 (May 31, 2012). 21. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 26.02 (2019). 22. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 31.03 (2019). 23. Michelle E. Boardman, Boilerplate Versus Contract: Contra Proferentem: The Allure of Ambiguous Boilerplate, 104 Mich. L. Rev. 1105, 1127 (2006) (“[C]ompulsive application of contra proferentem to clauses that are not ambiguous, but rather simply disputed, can also belittle the role of language . . . .”). 24. Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1417, 203 L. Ed. 2d 636, 647 (2019) (citing Corbin on Contracts). See also Candella v. Liberty Mut. Ins. Co., 2020 Mich. App. LEXIS 5243, *6 (August 13, 2020). 25. Sahrapour v. Lesron, LLC, 119 A.3d 704 (D.C. App. 2015). 26. Advance Wire Forming, Inc. v. Stein, 2020 U.S. Dist. LEXIS 153940, *31, n. 11 (N.D. Ohio Aug. 25, 2020), citing Yellowbook Inc. v. Brandeberry, 708 F.3d 837, 847 (6th Cir. 2013). 27. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 2.06 (2019). 28. Patrick's Rest., LLC v. Singh, 2019 U.S. Dist. LEXIS 111073 (D. Minn. July 3, 2019) (label not determinative); Samet v. Bayview Loan Servicing, LLC, 2019 U.S. Dist. LEXIS 216591 (D. Nev. Dec. 17, 2019) (court enforced a document the parties called a “tentative agreement”). 29. Timothy Murray, Corbin on Contracts § 2.9 (Rev. ed. 2018). 30. Id. 31. Dobson Bay Club II DD, LLC v. La Sonrisa de Siena, LLC, 393 P.3d 449 (Ariz. 2017). 32. E.g., Gaver v. Schneider’s O.K. Tire Co., 856 N.W.2d 121 (Neb. 2014). 33. Cosby v. Am. Media, Inc., 197 F. Supp. 3d 735, 742 (E.D. Pa. 2016). 34. E.g., Murphy v. Magna Seating of Am., Inc., 2020 U.S. Dist. LEXIS 64443, *12-13 (E.D. Mich. April 13, 2020). 35. U.C.C. § 2-725. 36. E.g., Bell v. Kokosing Indus., 2020 U.S. Dist. LEXIS 129400 (E.D. Ky. July 22, 2020). Delaware and New York are notable exceptions: certain contracts are exempt from this rule. See Timothy Murray, 15 Corbin on Contracts § 89.9 (Rev. 2d 2020) (publication pending). 37. In re Facebook, Inc., 402 F. Supp. 3d 767, 799-800 (N.D. Cal. 2019). 38. Restatement (Second) of Contracts, § 195, cmt. a (1991). 39. Courbat v. Dahana Ranch, Inc., 141 P.3d 427, 438 (Haw. 2006). 40. See Yang v. Voyagaire Houseboats, Inc., 701 N.W.2d 783 (Minn. 2005). 41. Dominguez v. United States, 2018 U.S. Dist. LEXIS 30060, *29 (D. N.M. Feb. 26, 2018). 42. E.g., Restatement (Second) of Contracts, § 195, cmt. a (1991); Copeland v. HealthSouth/Methodist Rehab. Hosp., 565 S.W.3d 260, 270-271 (Tenn. 2018). 43. Courbat, 141 P.3d 427 (citing Corbin on Contracts). 44. E.g., CSX Transp., Inc. v. ABX&D Recycling, Inc., 2013 U.S. Dist. LEXIS 84063 (D. Mass. June 14, 2013). 45. Tess Wilkinson-Ryan, Intuitive Formalism in Contract, 163 U. Pa. L. Rev. 2109, 2115 (2015). 46. Tims v. LGE Cmty. Credit Union, 935 F.3d 1228 (11th Cir. 2019). 47. Baltazar v. Forever 21, Inc., 367 P.3d 6, 11 (Cal. 2016). See Siler v. Chase Bank, USA, N.A., 2009 U.S. Dist. LEXIS 144870, *6 (N.D. W.Va. Jan. 29, 2009) (“[A]lthough most contracts are adhesion contracts that are on a ‘take it or leave it basis,’ these are generally enforceable.”). 48. United States v. Hare, 269 F.3d 859, 862 (7th Cir. 2001). 49. E.g., Nguyen v. Barnes & Noble Inc., 763 F.3d 1171, 1178-1179 (9th Cir. 2014); Motley v. ContextLogic, Inc., 2018 U.S. Dist. LEXIS 192447 (N.D. Cal. Nov. 9, 2018). 50. Starke v. Squaretrade, Inc., 913 F.3d 279 (2d Cir. 2019); Wilson v Huuuge, Inc., 944 F.3d 1212 (9th Cir. 2019). 51. Nicosia v. Amazon.com, Inc., 834 F.3d 220 (2d Cir. 2016); Cullinane v. Uber Techs., Inc., 893 F.3d 53 (1st Cir. 2018). 52. Starke, 913 F.3d 279. 53. Greenway Equip., Inc. v. Johnson, 602 S.W.3d 142, 150 (Ark. App. 2020) (citation omitted). 54. Team Contrs., L.L.C. v. Waypoint NOLA, L.L.C., 2017 U.S. Dist. LEXIS 160763, at *10 (E.D. La. Sept. 29, 2017). 55. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 56.02 (2019). An example: Jay Jala, LLC v. DDG Constr., Inc., 2016 U.S. Dist. LEXIS 150969 (E.D. Pa. Nov. 1, 2016). 56. NuVasive, Inc. v. Miles, 2020 Del. Ch. LEXIS 279, *42 (Aug. 31, 2020) (citation omitted). 57. In Elorac, Inc. v. Sanofi-Aventis Can., Inc., 343 F. Supp. 3d 789 (N.D. Ill. 2018), damages from a product manufacturer’s breach of contract with one of its distributors, preventing the distributor from making resales of the product, were held to be direct damages, even though the resales were transactions separate from the breached contract. The lost profits flowed directly from, and were a natural and probable result of, the breach. 58. U.C.C. § 2-719(2). 59. See, e.g., Steer Am., Inc. v. Niche Polymer, LLC, 2018 U.S. Dist. LEXIS 141799 (N.D. Ohio Aug. 21, 2018). This is a minority position. 60. This situation arises when, for example, “a product with a latent defect [is] incorporated into something else that cost much more to fix than merely the purchase price of the defective item.” Luckey v. Alside, Inc., 245 F. Supp. 3d 1080, 1091, n. 18 (D. Minn. 2017). 61. A practice “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.” U.C.C. § 1-303(c). See Restatement (Second) of Contracts § 222 (1981). 62. A sequence of previous conduct between the parties that is fairly regarded as establishing a common basis of understanding for interpreting their expressions and other conduct. U.C.C. § 1-303(b); Restatement (Second) of Contracts § 223 (1981). 63. A sequence of conduct with respect to the contract at issue that involves repeated occasions for performance by a party, and the other party, with knowledge and opportunity to object, acquiesces in that performance. U.C.C. § 1-303(a); Restatement (Second) of Contracts § 202(4) (1981). 64. U.C.C. § 1-201. 65. U.C.C. § 2-202. 66. U.C.C. §§ 1-201(b)(3), 1-303; Restatement (Second) of Contracts § 209, cmt (a) (1981); Restatement (Second) of Contracts §§ 221-224 (1981). 67. Bayer Chems. Corp., 171 Fed. Appx. 392. 68. U.C.C. § 2-202, comment 2. 69. Precision Fitness Equip., Inc. v. Nautilus, Inc., 2011 U.S. Dist. LEXIS 13576 (D. Colo. Feb. 2, 2011). 70. U.C.C. § 2-202, official comment 2; K. Rowley, Contract Construction and Interpretation: From the "Four Corners" to Parol Evidence (and Everything in between), 69 Miss. L.J. 73, 331 (1999)(course of performance cannot be “carefully negated”); 1 William D. Hawkland, Uniform Commercial Code Series § 2-208:3, at 2-306 (1998) (no provision in UCC to negate course of performance). 71. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 25.03 (2019). 72. Id. 73. See, e.g., Restatement (Second) of Contracts §§ 210, 213, 215, and 216 (1981). 74. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 25.06 (2019). 75. Restatement (Second) of Contracts § 216 (2)(a). 76. Armstrong Paint & Varnish Works v. Cont’l Can Co., 133 N.E. 711, 713 (Ill. 1921). Regardless of the test employed, evidence that the subsequent written agreement is void due to fraud, mistake, or duress generally is admissible. Blackledge v. Allison, 431 U.S. 63, 75, n. 6 (1977) (citing Corbin on Contracts). There are, of course, variations, depending on the jurisdiction. In Pennsylvania, for example, only fraud in the execution—not fraud in the inducement—overcomes the parol evidence rule. 77. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 25.05 (2019). The Restatement (Second) of Contracts states that including a merger clause in the contract is “likely to conclude the issue whether the agreement is completely integrated.” Restatement (Second) of Contracts § 216 cmt. e (1981). 78. John E. Murray, Jr. & Timothy Murray, Corbin on Contracts Desk Edition, § 25.05 (2019). 79. Billington v. Ginn-LA Pine Island, Ltd., LLLP, 192 So. 3d 77, 80 (Fla. App. 2016). 80. FIH, LLC v. Foundation Capital Partners LLC, 920 F.3d 134 (2d Cir. 2019). 81. Letter from Grant Gilmore, Professor, Vt. Law Sch., to Robert S. Summers, Professor, Cornell Univ. Law Sch. (Sept. 10, 1980), as reprinted in James J. White, Contracting Under Amended 2-207, 2004 Wis. L. Rev. 723, 724 (2004). 82. Timothy Murray, Corbin on Contracts § 3.37 (Rev. ed. 2018). 83. U.C.C. § 2-207(1). 84. U.C.C. § 2-207(2)(a). 85. U.C.C. § 2-207(2)(c). 86. U.C.C. § 2-207(2)(b). 87. Timothy Murray, Corbin on Contracts § 3.37 (Rev. ed. 2018). 88. U.C.C. § 2-207(3). 89. Id.