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Contracts II
South Texas College of Law Houston
Kelso, R. Randall

A. PAROL EVIDENCE RULE-court decides, substantive fact issue.
1. When applicable, it bars reliance on all prior oral or written evidence. If you have some writing, to what extent can you bring in other kinds of evidence to interpret what that contract is to mean.
2. Before-If you have a written contract, the PER bars everything that happens before that written contract. Keep what actually made it into the contract.
3. After-Anything added after can be admitted. Anything that occurs during the course of performance can be added to what the contract means.
4. Test: Is the document a completely integrated written document or not? -If so, PE bars reliance on all prior oral or written evidence.
-If no->Three elements to determine whether parole evidence rule applies, barring oral evidence (all three must be satisfied to allow PE): (Masterson Case)
1. Is the agreement in the form of a collateral agreement(different but related agreements)?
a. yes – court will not listen parol evidence about the contract prior to the written contract if there is a collateral agreement.
b. no (partial integration-different parts of same agreement) – may allow parol evidence.
2. It must not contradict express or implied provisions of the written contract.
a. parol evidence contradicts writing- PE excluded
b. parol evidence merely supplements or complements writing-
1. Trad- more likely to exclude the PE, looks at the writing.
2. Mod- may allow PE, looking at fairness.
c. Reasonable Harmony Test: is it reasonable that the PE and the writing are harmonious and can be read together?
1. Trad- more willing to say that they do not go together.
2. moderate mod- more willing to say that they will go together
3. extreme mod- must find direct contradiction to not allow PE.
3. Is this term one that the parties would not ordinarily embody in the K? (Mitchell case)
-. Look at industry standards.
a. parol evidence normally or naturally included in writing- PE excluded
b. not normally or naturally in writing-allow FE because it would not normally be in the writing.
b. How detailed is the writing?
c. Can it be easily inserted into the writing?
5. Note: there is always going to be some evidence of parole evidence.
6. Traditional-(Texas) favor the written contract. Traditional courts look only at writing itself.
7. Modern courts- seem to be more willing to allow parole evidence. Modern look at both the parol evidence and writing and consider all together.
8. Exceptions- to always include Parol Evidence-
1. Separate Contract- proof of K cannot be prevented by PE rule. But K can’t be something that would be required by the statute of frauds to be in writing.
2. problem with the negotiations-
a. trad (Texas)- fraud in the inducement of the contract.
b. mod- fraud, mistake, duress, misrepresentations.
3. Regrievences in contract-lack of consideration, illegal contract, condi

he icehouse lacks consideration.
12. Partial integration–Masterson v. Sine: Complete v. partial. Modern approach used- There is a land sale with an option to repurchase by the seller. Seller goes bankrupt. Parol evidence is that the option to repurchase is only for the Masterson family. Trustee in bankruptcy claims that they have a right to repurchase as well. Held-The parol testimony as to the limitation of assignment should have been admitted since that term would not necessarily have been included.
-Dissent-traditional approach-only look to writing to determine if something is a complete integration. Option to repurchase does not limit it to just family members. This may contradict the writing.
13. Limitation on PE- Alaska Northern Development v. Alyeska Pipeline: A price was reached on a contract, but there was a clause that the agreement was subject to final approval of the owner committee. A.N.D. contended that the parties understood the subject to approval language to mean that the Alyeska owner committee would review the proposed agreement only to determine whether the price was fair and reasonable. Attempt to limit the writing to a narrower scope.