Contracts II Outline

I. CHAPTER 5 THE PAROL EVIDENCE RULE AND THE INTERPRETATION OF THE CONTRACT
a. Parol Evidence Rule: The parol evidence rule enacts a principle of the common law of contracts that presumes that a written contract embodies the complete agreement between the parties involved. The rule therefore generally forbids the introduction of extrinsic evidence (i.e., evidence of communications between the parties which is not contained in the language of the contract itself) which would change the terms of a later written contract.
A. In order for the rule to be effective, the contract in question must be an integrated writing; it must, in the judgment of the court, be the final agreement between the parties (as opposed to a mere draft, for example). One way to ensure that the contract will be found an integration is through the inclusion of a merger clause, which recites that the contract is, in fact, the whole agreement between the parties. However, many modern cases have found merger clauses to be only a rebuttable presumption.
b. Two Step Process
A. 1. Requires setting the boundaries of the parties agreement
1. May partially be in writing
B. 2. Requires a documentation of the meaning of the parties agreement.
1. The Parol Evidence Rule: Follows from The Statute of Frauds. Whether or not the Parol promise is effective or can be enforced. A substantive rule of whether the parol promise has to be performed. Or is a part of the contract. Parol promise that is contemporaneous or made prior to the final contract is ineffective.
2. Ex. Mitchell v. Lath: We have the 4 corners substance test
a. 1. The agreement must in form be collateral
b. 2. It must not contradict express or implied provisions of the written contract.
c. 3. It must be one that parties would not ordinarily be expected to embody in the writing.
3. Parol Evidence Rule Common Law/UCC statements
a. Restatement 213: Common Law
i. If we have a binding contract that is completely integrated then it discharges prior agreements to the extent it is inconsistent with them.
ii. A binding completely integrated agreement discharges prior agreements to the extent that they are within the scope.
iii. The D must prove that this provision was in fact in the contract and that it was incomplete.
b. UCC unless the contracts are completely integrated then the Parol evidence can come in. Terms in which the confirmatory memoranda of the parties agree or which otherwise show in writing a final complete agreement. The terms included may not be contradicted by evidence of a prior agreement or contemporaneous (same time) oral agreement. The terms may be explained or supplement
i. By usage of trade or course/history of dealing
ii. Evidence of consistent additional terms unless the court find the writing to have been intended as a complete and exclusive statement of the terms of the agreement.
iii. The person who wants to keep out the agreement must prove the contract was complete. Not the P
c. Common law rule that involves contracts that does not involve the transaction of goods.
i. Has a much more protective rule of the document
d. The Parol Evidence rule honors the writing.
i. Protects the written contract
ii. Complex transactions, valuable items have to be in writing.
iii. Typically see only examples of written contracts
1. IF WE SEE THAT THE COURT FINDS THAT THE CONTRACT IS TOTALLY INTEGRATED THEN THE PAROL AGREEMENT IS UNENFORCEABLE AND INADMISSIBLE
2. IF IT IS PARTIALLY INTEGRATED THEN THE CONTRACT CAN BE SUPPLEMENTED BY PAROL EVIDENCE. THE PAROL PROMISE TO THE EXTENT IT IS CONSISTENT IS ENFORCEABLE.
a. Does not exclusively apply to written contracts.
iv. Evidence is not reviewed by the jury if the parol evidence rule is in effect. Purpose of the Statute of Fraud is to protect important contracts from fraud.
e. In PER we ask are we going to protect the parties when a deal was made and it doesn’t appear in the contract.
i. In the act of exclusion it is probably purposeful.
ii.
f. When does the Parol Evidence Rule apply?
i. We ask why do we have the PER if there is no Fraud?
ii. First we ask have the parties reached an integrated agreement?
iii. Integrated Agreement:
· An integrated agreement is either a partial or complete integration.
· If it contains some, but not all, of the terms as to which the parties have agreed then it is a partial integration.
· This means that the writing was a final agreement between the parties (and not mere preliminary negotiations) as to some terms, but not as to others.
· On the other hand, if the writing were to contain all of the terms as to which the parties agreed, then it would be a complete integration.
· The importance of this distinction is relevant to what evidence is excluded under the parol evidence rule.
· For both complete and partial integrations, any evidence contradicting the writing is excluded under the parol evidence rule.
· However, for a partial integration, terms that do not contradict the writing but merely add to it are not excluded.
iv. § 209. Integrated Agreements
1. (1) An integrated agreement is a writing or writings constituting a final expression of one or more terms of an agreement.
2. 2) Whether there is an integrated agreement is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the parol evidence rule.
3. (3) Where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an integrated agreement unless it is established by other evidence that the writing did not constitute a final
expression.
v. § 210. Completely And Partially Integrated Agreements
1. (1) A completely integrated agreement is an integrated agreement adopted by the parties as a complete and exclusive statement of the terms of the agreement.
2. (2) A partially integrated agreement is an integrated agreement other than a completely integrated agreement.
3. (3) Whether an agreement is completely or partially integrated is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the parol evidence rule.
vi. § 217. Integrated Agreement Subject To Oral Requirement Of A Condition
1. Where the parties to a written agreement agree orally that performance of the agreement is subject to the occurrence of a stated condition, the agreement is not integrated with respect to the oral condition.
vii. § 2-202. Final Written Expression: Parol or Extrinsic Evidence.
1. Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented
2. (a) by course of performance, course of dealing, or usage of trade (Section 1-303) ; and
3. (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.
viii. 2003 Revision:
1.