Alaska Northern Development, Inc. v. Alyeska Pipeline Service Co.

Supreme Court of Alaska · 1983 · Contracts

Contractsparol evidencepartial integrationUCC 2-202contract interpretationletters of intentcondition of approvaljury trial

Facts

AND's president, David Reed, negotiated with Alyeska employees to purchase Alyeska's surplus Caterpillar parts. AND sent a December 10, 1976 letter of intent, and Alyeska responded with a December 11 letter of intent stating that the proposal was "subject to the final approval of the owner committee"; later, Reed and Alyeska's Riekett filled in a price term of sixty-five percent of Alyeska's price and Riekett signed the letter. In March 1977 the owner committee rejected the proposal. AND claimed the parties understood the owner committee's approval authority to be limited to review of price, while Alyeska denied any such limitation.

Issue

Whether the superior court correctly applied the parol evidence rule to exclude extrinsic evidence that the owner committee's approval power was limited to price, thereby defeating AND's breach of contract theory. The appeal also presented whether AND was entitled to a jury trial on contract issues, whether punitive damages could proceed, whether limits on cross-examination were proper, and whether the attorney's fee award was an abuse of discretion.

Rule

Under AS 45.02.202, a court must first determine whether a writing is integrated as a final expression of some or all terms of the parties' agreement. If integrated, evidence of prior or contemporaneous terms is inadmissible if it contradicts or is inconsistent with the integrated term; even consistent additional terms may be excluded if the court concludes they necessarily would have been included in the writing if intended. A proposed meaning supported by extrinsic evidence may be considered only if the writing, read in context, is reasonably susceptible to that meaning, and inconsistency under U.C.C. § 2-202 means the absence of reasonable harmony in the language and respective obligations of the parties.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Seattle, Nora Kim negotiated with Cascade Yard Supply to buy a lot of surplus generators. The signed memorandum stated that the sale was "subject to final approval by the inventory committee." Nora later offered testimony that everyone orally agreed the committee could reject only if storage fees had not been paid.

If the court finds the memorandum was intended as a final expression of the approval clause, is Nora's testimony most likely admissible?

Explanation. Under the majority rule, the court first asks whether the writing is integrated as to the term at issue. If it is, prior or contemporaneous evidence is inadmissible if it contradicts or is inconsistent with that integrated term. An unqualified clause making the deal subject to final committee approval is not reasonably susceptible to a narrow oral limitation that approval may be denied only for one specified reason. That proposed limitation lacks reasonable harmony with the written allocation of authority and is therefore inconsistent.