Martin-Scott Contracts II Spring 2013
The Parol Evidence Rule and Interpretation of the Contract
Parole evidence- The law presumes that all matters written or oral that occurred prior to signing the writing are included in the writing and will not allow in evidence of the contrary.
Parol Evidence Rule Meaning- If the parties have taken the time and trouble to reduce their agreement to a writing our law presumes that they have integrated into that writing all matters, written or oral, that occurred prior to signing the writing and will not allow in evidence to the contrary.
Example: Two corporations go back and forth arguing about the terms of the contract for months and final reach an agreement and sign it, but one side says that they meant to add something else to the agreement that is not in the writing. The parol evidence is trying to protect against this.
Note: Parol evidence is generally assumed to include evidence of oral or written agreements or negotiations that are prior to or contemporaneous with a writing intended to be the complete or partial integration of the parties’ final agreement.
Parol means “informal” and it bars the introduction of all negotiations or agreements occurring prior to the signing of the writing, whether written or oral. Pg. 460
Basic Assumptions:
1. We have a WRITTEN contract (has to be in writing). If there IS NO WRITING then there is no Parol evidence Rule problem.
2. There are problems that arise with the contract.
3. Is the writing the contract by itself or is it the WRITING + Something Else =the contract?
The parol evidence rules answers the question or addresses The issue of when can a term that is outside the writing be added into the writing to become part of the contract.
The Parol evidence rule is a rule of exclusion. IF the Parol Evidence rule doesn’t apply when the evidence is admissible.
Integration- a writing intended by the parties to be the final statement of the agreement (their final writing)
Extrinsic Evidence- Terms agreed upon Prior to or AT THE SAME TIME as the integration (oral or written). It is the outside evidence you’re trying to add into the writing to be the whole contract.
Interpretation- The resolution of the meaning of a written contract is the process of interpretation. If you are trying to figure out what a term already in the contract means. (This is not the PER).
Problem 108
Exceptions to the Parol Evidence Rule
Restatement (Second) of Contracts
Section 213 Effect of Integrated Agreement on Prior Agreements (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…
UNIFORM COMMERCIAL CODE § 2-202. Final Written Expression: Parol or Extrinsic Evidence.
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
(a) by course of dealing or usage of trade (Section 1-205) or by course of performance (Section 2-208); and
(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.
Mitchill v. Lath- The Mitchills (Plaintiffs) brought an action against the Laths (Defendants) to enforce an oral agreement to remove an icehouse from property purchased from the Defendants. Defendants appealed from judgment granted in favor of Plaintiffs.
The rule is An oral agreement is not collateral to the written agreement if its subject is closely related to the subject of the written agreement.
The parol evidence rule defines the limits of the contract to be changed. It applies to attempts to modify a contract by parol. If one agreement is oral and the other is written a problem arises, as is in this case, whether the bond is sufficiently close to prevent proof of the oral agreement.
For an oral agreement to vary the written contract at least three conditions must be met, 1)the agreement must in form be a collateral one, 2) it must not contradict express or implied provisions of the written contract, and 3) it must be one that parties would not ordinarily be expected to embody in the writing. (or is it must not be so clearly connected with the principal transaction as to be part and parcel of it.
An oral agreement is not collateral to the written agreement if its subject is closely related to the subject of the written agreement. Here, the agreement to remove the icehouse was such that it would have naturally been included in the written contract for the sale of the farm. The oral agreement contradicts the written agreement. Therefore, the writing was concluded as being a complete integration and cannot be modified.
There are two conflicting views on parol evidence. The first is the Williston or Restatement view, also known as the four corner rule, which states that if a term is not found in the writing, then it cannot be offered into evidence by one of the parties if the court concludes that it would have been natural of the parties to have included it in the writing. H
ordinarily (naturally) have included it in the writing?
Collateral means a side issue not part of the main issues in the contract.
Collateral matter exception- allowing in evidence of side agreements (if it is not in the written contract and just an oral agreement) as long as there is a reasonable explanation as to why these agreements might have been omitted from the writing. In a sale of goods, UCC § 2-202 calls these agreements “consistent additional terms”.
3. Williston’s View (majority)- (assumes a total integration) (exclusionary) This prevents others from adding to the contract drafted. (1)To prohibit you from adding anything you have to add a merger/ integration clause (language in the contract that suggests that it is final. The drafters do not want anything else added. (2) Would it have been natural to be included in the writing? If yes the there is a total integration If no partial integration.
Note: Court will look at evidence if it was signed under duress, fraud, etc. Under the avoidance doctrine then it will be allowed in, and will look at bargaining power or ability of the parties as well. For example they will look a contract between a person and a giant corporation like Apple or Microsoft (unequal bargaining power).
3. Corbin’s View- court and judge should look at everything. The lawyers should be able to introduce all evidence and then the judge and jury should decide (least followed view). USE WITH EVERY OTHER THING OTHER THAN Goods. For example use if talking about real estate etc.
4. UCC (2-202)- (Most significant)- (assumes partial integration) will let everything come in unless you can show the judge that it certainly would have been in the contract. This rule lets everything in. All you need is an intent to contract, if it is not in there then they will fill the gaps. The UCC states that the writing is not the only evidence of the agreement between the two parties. You can’t contradict but you can supplement. You can use course of dealings, course of performance, for example. USE WITH MOVABLE GOODS ONLY! Most of the time things come in because it’s hard to overcome.
5. Restatement (III) – mixture of Williston/ R(I), UCC and Corbin
