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Contracts
Wayne State University Law School
Wellman, Vincent A.

PAROLE EVIDENCE RULE
· The PER is a rule of substantive law. The right to object to evidence isn’t lost if not asserted. Federal courts are bound to apply state versions of the PER.
· PER has the effect of preventing one party from introducing extrinsic or “collateral” evidence of matter not contained in the written agreement b/w the parties, where the evidence is offered to supplement or contradict the written agreement.
· PER only applies when (a) the parties have a writing and (b) that writing is intended to be the integration of their agreement

Williston
Corbin / 2nd Rest / 2-202
Complete or Partial Integration? Complete – a writing intended to be a final and exclusive expression of the agreement of the parties. Partial – writing intended to be final but not complete.
(plain meaning): the question of integration must be determined from the “four corners” of the writing w/o resort to extrinsic evidence.

A writing itself can’t prove its own completeness. Integration should always depend on the actual intent of the parties and the court should consider evidence of all the facts and circumstances surrounding the K. After hearing this evidence, the court should determine in camera whether the agreement was integrated. 2-202 begins with the assumption that the agreement is NOT complete.
Merger Clause
conclusively establishes that the writing was integrated; a complete and final embodiment.
Any attempt to enter in parole evidence is an attempt to vary the merger clause and thus is barred.
not dispositive of complete integration. There may be relevant evidence (i.e. of a collateral agreement) to dispel the intent behind the merger clause. M.C. only important when it specifically disclaims warranties / claims / actions.
Complete integration
May not be contradicted, nor supplemented. May be explained.
May not be contradicted, nor supplemented. May be explained.
Incomplete Integration
May not be contradicted. May be supplemented by additional consistent terms (may not vary the terms of the written K). May be explained.
May not be contradicted. May be supplemented by additional consistent terms (may not vary the terms of the written K). May be explained.
Supplementation: Additional Consistent Terms
Normal and Natural Test UCC: consistent additional terms should be excluded only where in the court’s view they would if actually agreed upon certainly have been included in the document.
Normal and Natural Test UCC: consistent additional terms should be excluded only where in the court’s view they would if actually agreed upon certainly have been included in the document.
Explanatory Evidence offered to explain the meaning of the agreement.

admits explanatory parol evidence only if writing appeared on its face to ambiguous.
(ambiguous = Can I make sense o this K? Is this too complex for me to make sense out of?). Usually a patent, ambiguity.
admits explanatory parol evidence to show that the language used in the agreement has a special meaning, even if that language doesn’t appear unclear merely fro an inspection of the writing. (ambiguous = a term susceptible to 2 reasonably different interpretations). Latent ambiguity.
Post-signing agreeements
Admits agreements, whether oral or written, made after the execution of the writing.
Admits agreements, whether oral or written, made after the execution of the writing.
Simultaneous Agreements
Admits written evidence regarding events simultaneous to the signing.
Admits written evidence regarding events simultaneous to the signing.
Oral Condition Precedent
Allows evidence offered to show that effectiveness of the agreement was subject to an oral condition precedent. §217 2nd R.
Allows evidence offered to show that effectiveness of the agreement was subject to an oral condition precedent. §217 2nd R.

Fraud

would limit the fraud exception to cases of fraud in the execution. Very traditional courts will only allow fraud evidence in when it is claimed against the mergerclause.
would extend the fraud exception to instances of fraud in the inducement – misrepresentation of fact that induce the other party to enter into the K.
Equitable Remedy
evidence allowed to establish a right to an “equitable” remedy, such as reformation of the K.
evidence allowed to establish a right to an “equitable” remedy, such as reformation of the K.
Collateral Agreement
this exception only applied to an agreement about a subject distinct from that to which the writing relates.
Asks whether the alleged term might naturally be included in the writing. If so, the evidence is barred. Allocates entitlement to the party trying to keep the evidence out.
the agreement won’t be regarded as fully integrated if the parties have made a consistent additional agreement which it either agreed to for separate consideration or is such a term as in the circumstances might naturally be omitted from the writing. §216(2) 2nd R. allocates entitlement to party trying to get the evidence in.

Thompson v. Libby 1885 (384) Willistonian Approach
Facts: Δ didn’t pay for logs, pleading a warranty of the quality of the logs (implied warranty of merchantability), alleged to have been made at the time of the sale. Δ offered at trial oral testimony to prove the warranty.
Rules: (Willistonian Approach)
· The PER does not apply to a writing incomplete on its face.
· Where the parties have deliberately put their engagement into writing in such terms as to import a legal obligation, without any uncertainty as to the object or extent of such engagement, it is conclusively presumed that the whole engagement of the parties, and the manner and extent of their undertaking was reduced to writing.
· The only criteria of the completeness of the writing is the writing itself.
Analysis:
· Here, the written agreement on its face purports to be a complete expression of the whole agreement (complete integration) and there is no uncertainty about the writing. (Looks only to the agreement in writing and don’t consider the likely possibility of an agreement in fact).
· Ultimately, warranty isn’t collateral to the sale thus, the collateral exception doesn’t apply.

Taylor v. State Farm Mutual (392): Corbinian Approach
Issue: Should extrinsic evidence be admitted? Deals with supplementation of the written agreement.
Rule: Arizona view (Corbinian): 1st step: court consider the evidence that is alleged to determine the extent of integration, illuminate the meaning of the K language, or demonstrate intent. 2nd step involved finalizing the court’s understanding of the K. The PER applies here and precludes admission of the extrinsic evidence that would vary or contradict the meaning of the written works (evidence as aid of interpretation of K allowed).
Conclusion: The release language was, as a matter of law, susceptible to differing interpretation B/c interpretation was needed and b/c the extrinsic evidence established controversy over what occurred and what inferences to draw form he events, the matte was properly submitted to the jury.

Sherrod, Inc. v. Morrison-Knudsen Co. (407): supplementary terms
Facts: Sherrod is arguing that oral agreement beyond the written K was part of the intended agreement b/w the parties. If the court concludes that the written agreement is a complete embodiment, then we need to see if the additional evidence would vary the terms.
Analysis:
· Does the proposed additional evidence vary the term? Yes. The writing Ks for earthwork in the quantity “lump sum” for the consideration of $97,500. The alleged oral agreement Ked for earthwork in the quantity of 25,000 cubic yards for the consideration of $97,500.
· Is there an ambiguity in the written K? No, because there is no quantity term in the agreement as written. Sherrod isn’t trying to explain an ambiguous term, he’s trying to supplement the written K. Because the extrinsic evidence is proposed to supplement to written K, it is barred by the PER because it varies the terms of the written K. But how can it vary the terms when there is no quantity term? A binding agreement forecloses and displaces any previous negotiations. The merger clause in the written K indicates it to be a complete integration which throws everything out. Because the extrinsic evidence contradicts the merger clause, it is thrown out. A circular, Willistonian approach.

NANAKULI PAVING & ROCK CO. v. SHELL OIL CO admittance of trade usage
Rules 1:
Trade usage is to be used to reach the “commercial meaning of the agreement” by

tation that makes the K valid is preferred to one that makes it invalid.(permeates all case holdings, we try to keep Ks valid, if it looks like they meant a K, then try to find a valid interpretation, but this is dismissed by walker v keith.)
Omnia praesumuntur contra proferentem: If a written K contains a word or phrase which is capable of two reasonable meanings, one of which favors one party and the other of which favors the other, that interpretation will be preferred which is less favorable to the one by whom the K was drafted. This maxim favors the party of lesser bargaining power, who has little or no opportunity to choose the terms of the K, and perforce accepts one drawn by the stronger party. Such “Ks of adhesion” are discussed below. However, the maxim is commonly invoked in cases that do not reveal any disparity of bargaining power between the parties.
Interpret K as a whole: A writing or writings that form part of the same transaction should be interpreted together as a whole, that is, every term should be interpreted as part of the whole and not as if isolated from it. This maxim expresses the contextual theory of meaning, which is, perhaps, a truism. Extension: Never interpret a singular clause as meaningless or “mere surplussage.”
Purpose of the parties: The principal apparent purpose of the parties is given great weight in determining the meaning to be given to manifestations of intention or to any part thereof. This maxim must be used with caution. In fact, the two parties to a (bargain) K necessarily have different, purposes, and if these are apparent, then the court can construe a principal or common purpose from the two as a guide to the interpretation of language or the filling of gaps. Thus a K to sell, buy, and export scrap copper was construed to make the buyers obtaining of an export license a condition of the seller’s promise to deliver. However, if the purposes of the parties are obscure the court may well fall back upon “plain meaning.”
Specific provision is exception to a general one. If two provisions of a K are inconsistent with each other and if one is general enough to include the specific situation to which the other is confined, the specific provision will be deemed to qualify the more general one, that is, to state an exception to it. A lease of a truck-trailer provided that the lessee should be absolutely liable for loss or damage to the vehicle, yet another clause stated that no party’s liability should be increased by this K. It was held that the former was more specific and therefore controlled the general provision, hence the lessee was liable. A careful draftsman would have stated the former as an exception to the latter, and the court in effect does it for him.
Handwritten or typed provisions control printed provisions. Where a written K contains both printed provisions and handwritten or typed provisions, and the two are inconsistent, the handwritten or typed provision are preferred. This maxim is based on the inference that the language inserted by handwriting or by typewriter for this particular K is a more recent and reliable expression of their intentions than is the language of a printed form. While this maxim is used in interpreting insurance Ks and other Ks of adhesion, it is also applicable to all Ks drawn up on a printed form.
Public interest is preferred. If a public interest is affected by a K that interpretation or construction is preferred which favors the public