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Contracts II
South Texas College of Law Houston
Busbey, A.

I. Parol Evidence Rule
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

Parol Evidence Test:

1) Is it Written ? NO; PE OUT.


2) Is it Final? YES; PE OUT.


3) Does the PE contradict the writing? YES; PE OUT.


4) Is the K complete? YES; PE OUT.

IF NO, PE will be Admitted!

Parol Evidence types:
1. Contemporaneous or:
2. Collateral

(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) 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.
a. Requirements.
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.

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

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.

Test for completeness:
– A document is said to be an “integration” of the parties’ agreement if it is intended as the final expression of the agreement.

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.
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.

Tests used to determine if t

’ intent. But, if the ambiguity is so fundamental that there is no way that the court could determine what the parties intended, there may be no enforceable contract at all.
Minority view
The trend is to admit parol evidence more frequent­ly. Even where the terms of a contract appear to have a plain meaning; parol evidence will still be admitted to interpret the terms if the language of the contract is reasonably susceptible to the interpretation offered by the party wishing to admit the parol evidence.
Patent ambiguity:
Apparent on the face of the contract.
Latent ambiguity:
Cannot determine if the contract is ambiguous until evidence admitted to determine if the ambiguity exists.

Interpretation vs. Extrinsic evidence two step process:
(1) Legal: Court will determine if the evidence is reasonably susceptible to have the meaning that the party who wishes the evidence to be admitted could be interpreted as such.
(2) If the plain meaning is of the contract is ambiguous then evidence can be admitted.

Procedure for Interpretation:
(1) Read K
(2) No ambiguityà apply the plain meaning rule
(3) Ambiguousà admit extrinsic evidence to determine parties intent