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Contracts II
South Texas College of Law Houston
Page, Phillip E.

Contracts II
I. Parol Evidence Rule
The Parol Evidence Ruleà Where the parties to a contract express their agreement in a writing with the intent that it embody the full and final expression of their bargain, any other expressions –written or oral made prior to the writing, as well as any oral expressions contemporaneous with the writing are inadmissible to vary the terms of the writing

1) Is it Written ? Must be yes
2) Is it Final? Must be Yes
Must answer yes to both of these to have a K
Does the Evidence contradict the writingà Yes à Out
Is the K complete? à Yesà out
Noà Evidence will be admitted
Written evidence could be
1) contemporaneous or:
2) Collateral
3) The same
(1) Contemporaneous writing: If an ancillary writing is signed at the same time a formal document is signed, the ancillary document is treated as part of the writing, and will not be subject to the parol evidence rule but if it is signed prior to the formal document then cannot be admitted
(2) To show a collateral oral agreement. A party may claim that there were two separate agreements made—the first embodied in the writing, and the second a “collateral” oral agreement supported by the consideration of the first agreement (i.e., the “collateral” oral agreement is alleged to have been reached in consideration for the promises set forth in the written agreement). Parol evidence of a second agreement may be admitted since it does not affect the written agreement at all.

Requirements. Parol evidence is admitted to show a “collater­al” oral agreement if (i) its terms do not conflict with the written agreement, and (ii) the collateral agreement covers a subject that would not ordinarily be included in the written agreement.

The parol evidence rule: Policies issues.
1. the assumption that written evidence is more accurate than human memory,
2. Another policy is based on the fear that fraud or unintentional invention by witnesses interested in the outcome of the litigation will mislead the finder of facts.


A. Preliminary determinations made by judge: Judge, not the jury, decides: (1) whether the writing was intended as integration; (2) If so, whether the integration is “partial” or “total”; and (3) whether particular Evidence would supplement the terms of a complete integration.


Earlier oral agreements that show illegality, Fraud, duress, mistake, lack of consideration, or any other fact that would make the contract void or void able.
Particular disclaimer:
Existence of a condition:.

The parol evidence rule, UCC 2-202 and the giving and taking of warranties
1) If a disclaimer is effective, the parol evidence rule is irrelevant. The warranty has been excluded from the agreement by other means.
2) If the seller has made an implied warranty of merchantability and it has not been disclaimed, since the warranty is a term of the agreement, one could argue that it is subject to exclusion under UCC 2-202 if the parties intended the writing to be a complete and exclusive statement of the terms of the agreement. Most Courts would insist upon the same level of detail and consciousness in the manifestation of intention to integrate the writing as UCC 2-316 (2) requires for a disclaimer in order to avoid this scenario
3) UCC 2-316 (1) which makes it impossible to disclaim an express warranty, states that the matter is subject to the provisions of this article on parol evidence or extrinsic evidence (section 2-202)

Test for completeness
The “parol evidence rule” is in fact two sub-rules:
– “Integration”: A document is said to be an “integration” of the parties’ agreement if it is intended as the final expression of the agreement.

1. Partial integration: When a writing is a partial integration, no evidence of prior or contemporaneous agreements or negotiations (oral or written) may be admitted if this evidence would contradict a term of the writing. Merger clauseà a clause indicating that the agreement is complete and final.
2. Total integration: When a document is a total integration, no evidence of prior or contemporaneous agreements or negotiations may be admitted which would either contradict or add to the writing.
– Subsequent agreements: The parol evidence rule never bars consideration of subsequent oral agreements.

A. Tests used to determine if there was a final integration
1) Traditional, Face of the agreement test, Four Corners Rule, or Williston’s view If the written agreement appeared to be complete and final, no parol evidence could be ad­mitted. This is the traditional or objective view. RIK. Reasonable person standard
2) Modern or Corbin’s view or any relevant evid

Patent ambiguityà apparent on the face of the contract
Latent ambiguityà cannot determine if the contract is ambiguous until evidence admitted to determine if the ambiguity exists

Restatement 202 & 203 Rules the court will use in interpretation
(1) Interpretation should be made with the public policy in mind
(2) Interpret the contract against the draft-person
(3) Interpret the writing as a whole
(4) Where the language has a general prevailing meaning that meaning is to be used
(5) Words of art and technical terms are to be used in their technical meaning

A. Modern view: Parties are generally allowed to introduce evidence of what they subjectively thought the terms in writing meant, even if the writing is integration.
B. Maxims of interpretation: Maxims that courts use in deciding which of two conflicting interpretations of a clause should be followed:
1. Primary purpose: If the “primary purpose” of the parties in making the contract can be ascertained, that purpose is given great weight.
2. All terms made reasonable, lawful and effective:
3. Construed against drafter:
4. Negotiated terms control standard terms:

1) Liberal modern trend–
(1) The wording of the contract is reasonably susceptible to the meaning argued for by the evidence. Extrinsic evidence may only be excluded when it is feasible to determine the meaning of words from the instrument itself; this is seldom the case since language is often inexact as conveying the intention of the parties.
(2) If the courts are too liberal in allowing such “interpretation,” they open the possibility of varying or contradicting the true intent of the parties as written.

2)Ambiguity resolved by incorporation by reference
If the court is unable to arrive at the intent of the parties by examination of the contract terms, the court may infer the meaning of the ambiguous ter