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Contracts II
South Texas College of Law Houston
Powers, Jean Fleming

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
Next
Does the Evidence contradict the writingà Yes à Out
No
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.

ROLES OF JUDGE AND JURY

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.

SITUATIONS WHERE PAROL EVIDENCE RULE DOES NOT APPLY

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.

lain 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.

II. INTERPRETATION
1. Interpretation

Interpretation vs. Extrinsic evidence two step process
(1) Legalà 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 reasonable susceptible to will go to the fact-finder
If the plain meaning is of the contract is ambiguous then evidence can be admitted
(1) Read Kà No ambiguityà apply the plain meaning rule
(2) Ambiguousà admit extrinsic evidence to determine parties intent
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:
Primary purpose: If the “primary purpose” of the parties in making the