Contracts II Outline

Contracts II Kuney Spring 2017

Chapter 14: Parol Evidence Rule

Def. When parties to a contract embody the terms of their agreement in writing, intending that writing to be the final expression of their agreement, the terms of the writing may not be contradicted by evidence of any prior agreement.

Complete Integration: If we intend the writing to be full, binding Contract —> Nothing before matters.

Partial Integrated Agreement: Some of the terms are final, but not wholly complete —> Allow additional terms in.

Cannot contradict or vary terms that have been recorded in the writing.

Parol Evid. is therefore admissible to clarify the uncertainty or ambiguity. This does not mean the uncertainty or ambiguity allows for the admission of whatever parol evidence may be tendered on any aspect of the Contract. The evidence must be pertinent to the meaning of the unclear terms, or it must be reconcilable with what has been written.

Application of the Parol Evid. Rule

The parol evidence rule governs the effect of a written agreement on any prior oral or written agreements between the parties. The rule provides that a writing intended by the parties to be a full and final expression of their agreement may not be supplemented or contracted by any oral or written agreements made prior to the writing.

Applies to terms before (written or oral), or contemporaneously with (oral only), the contract

Interpretation

Must not contradict express or implied terms of the written contract, but does allow evidence about the meaning the parties intended for certain terms
Presumption that the writing is complete

Need “substantial evidence” that the parties did not intend the writing to be the whole agreement

Must be one that would not ordinarily be expected to be in that contract in order to include the evidence
If conditions exist, the writing is not integrated.

Applies to inconsistent terms before the written contract- not after
Directly conflicts with contract

If conditions exist, the writing is not integrated.

“Four corners” of the contract: “Absent ambiguity, the parties’ intentions must be discerned from the four corners of the document, and extrinsic evidence may not be considered.”

Merger all prior discussions are merged into this document

Integration Clause using Restatement, anything previously stated is not binding.

Rule Doesn’t apply to

evidence of subsequent modifications
industry practices
evidence that shows the executed document was clearly erroneous
fraud or mistake

Key Points:

The Rule bars evid. of prior contemporaneous agreements not subsequent ones. It only bars evid. offered to prove what terms of contract are.
Rule is for the Ct., not for the Jury.

Case Law:

[FDIC v. Hadid] Ct. finds that the written guarantee was complete and cannot be modified by parol evid. Even if the written agreement was not fully integrated, the oral conv. conflicts, thus cannot be admitted.

[U.S. v. Fentress] Plea deal contained a fully integrated clause, and thus any issue not discussed cannot be barred. Didn’t discuss whether the new term would be tacked on to the current term, so the fact that it wasn’t addressed – meant there was no agreement on that point

[Masterson v. Sine] Transfer ranch to in-laws prior to bankruptcy. “Traynor 2-step.”

Plausible that that intent would normally and naturally not be included in the contract. Rule permitted. R2d § 216(2)(b)

[Hunt Foods v. Doliner] Negotiations to acquire assets, buy-out. Rule will not bar a prior agreement or a contemporaneous oral agreement that explains or supplements a written agreement by evid. of consistent additional terms. However, if the writing was intended as a complete and exclusive statement of terms, it will be barred.

[Luria Bros.] Differing terms in confirmatory memoranda do not negate antecedent oral agreements.

[Zell v. American Seating] War contract, left “undesirable” commission rate language off written contract. R2d § 209 Integrated Agreement, “sham” – partial integrated agreement was never intended to be a complete integration.

Agreement was never intended to be a full integration, but not to represent

Parol. Evid. Rule doesn’t apply.

Supplement, Questions, Restatement:

R2d § 213 (Parol Evidence Rule)

(1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.

(2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope.

R2d § 209 Integrated Agreement:

R2d § 210 Completely, Partially Integrated Agreement:

R2d § 216(2)(b) – “might naturally be omitted” from the writing

UCC§ 2-202 presumes strongly parties intent to contract in light of their own and mar