Parol Evidence – objective to protect written document; only when there is a writing;
Definition
Evidence of prior or contemporaneous negotiations and agreements that contradict, modify, or vary contractual terms is inadmissible if the written contract is intended as a complete and final expression for the parties
· Omitted Terms (i.e Gianni V. Russell – term not in the final writing)
o Draft Document to the Final Writing (integrated document)
§ An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement (RS 209)
§ Is the integration complete or Final? (legal consequence will vary) (RS 209 (1))
· Complete
o Integrated agreement adopted by the parties as a complete and exclusive statement of the terms of the agreement. (RS 210(1))
§ Look at intent of parties
· i.e, Is there merger clause?
§ Where parties deliberately put agreement in writing, the law declares the writing to be the only evidence of their agreement(Gianni v. Russell – oral agreement prior to store lease)
o No additional evidence is permitted (RS 213(2))
§ Preliminary negotiations, conversations, and verbal agreements are merged and superseded by the subsequent written contract. (Gianni v. Russell)
· Partial (RS 210 (2))
o Integrated agreement other than a completely integrated agreement (RS 210 (2))
§ If writing omits a consistent additional agreed term which
· Agreed to for separate consideration
· The term might naturally be omitted from the writing (RS 216(2))
o Evidence of collateral agreement admissible if it may naturally be made as separate agreement (Masterson v. Sine(option term had no consideration and vague option – evidence introduced to prove option was to keep in family only – ).
o Only evidence of Consistent Terms and consistent prior agreements are allowed (cannot contradict terms) (RS 213(1)) (RS 216(1))
· Evidence (Agreements and negotiations prior to or contemporaneous with the adoption of a writing) is admissible to prove whether or not a contract is partially or completely integrated.(RS 214)
§ The judge will decide when something is integrating, complete or partial, or whether something is consistent.
· Interpretation of Contract – in document, but how do we interpret it?
o Four corners rule
§ Stated Meaning
§ Intent of the final parties
· Merger clause?
§ Strict approach
§ The document speaks for itself, Additional information not allowed
· Evidence outside of the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing (WWW Associates v. Giancontieri – Property term clause said both can term but P claims only he was inteded to be able to cancel – evidence not allowed – would create ambiguity)
§ If term ambiguous, the court looks to the plain and ordinary meaning (i.e dictionary)
o Traynor rule
§ Intended Meaning
§ If Language is susceptible to varying interpretations then relevant extrinsic evidence that helps with the interpretations is admissible
· Test of admissibility is if evidence can prove a meaning to which the language of instrument is reasonably susceptible (Pacific Gas – two parties disagree on indemnity clause. P says clause was to cover injury of third party property only not P’s property. Evidence admitted)
o Expansion of Susceptibility (minority position)
§ Traynor allows any evidence that would eliminate any susceptibility to ambiguity (Delta Dynamics V Arioto – Did not meet minimum trigger locks. Want to introduce term evidence that says term clause says no damages if the case of not meeting minimum)
· If the term is ambiguous, the Interpretation must be supported by reasonable and objective standards (Frigalment v. BNS – term said US grade a government inspected chicken – one of the classifications was stewing chicken. P wanted young chicken – if P wants this narrower definition he has burden of proof. D was supported by the government classifications). Note: if this were four corners rule,
§ Also known as California rule
· Exceptions
o Formation Defects
§ Lack of offer, acceptance, consideration, duress, undue influence, fraud, material misstatement, illegality
o Reformation
§ Parties themselves or
§ Court reforms contract
· Court of equity has power to reform written evidence of contract and make it c
ct terms supplied by the court
o If the contract allows or provides for discretionary judgment then the court will assume the discretionary judgment is applied in good faith
§ Dalton v Educational Testing (SAT appeal and panel didn’t look at info so no good faith)
· court will not interfere with one party’s discretionary judgment, unless the exercise of discretion done so arbitrarily or irrationally
· A Covenant of Good faith and fair dealing is implied in every contract
§ No independent cause of action for an implied covenant of good faith and fair dealing. The implied covenant must attach itself to something to other provision (breach of material term, breach of express term, etc) be operational (Burger King – Franchise owner sues BK for breach of good faith – no express term for exclusivity but authorized another BK near him. BK wins)
§ One party cannot take deliberate advantage of oversight made by counterparty concerning its rights of the contract. (Market Street Associates – P didn’t read provision and D w/intention omitted mention of provision in correspondence)
§ Leasee can modify use of premises even if premises is only used for a particular purpose if there is a good faith and legitimate business judgment (Dickey v. Philadelphia – changed purpose to only simonizing but did so w/ good faith and judgment so OK)
§ Every contract, there is an implied covenant that neither party shall do anything which will have the effect of destroying or injuring the right of the other party to receive the fruits of the contract (Bak a lum v Alcoa)
· Best Efforts
o Court will not impose a best efforts clause where none existed in the first place (Zilgh v. Prentice Hall –PH was to use independent discretion – no best efforts implication)
