Contracts II – Kisabeth – Winter 2016
Parole Evidence Rule and Interpretation of the Contract
What is the parol evidence rule?
A writing intended by the parties to be the final written expression of their agreement (integrated) may not be contradicted by prior or existing statements, agreements, negotiations (extrinsic evidence), whether oral or written
The issue regarding the PER is whether the obligation/evidence is part of the party’s agreement or not
Triggers to show PER problem: oral agreement before putting agreement into writing then when it is in writing its not in there.
Approaching a PER problem
Is the K in writing?
Do any of the 5 exceptions apply? Only go through what applies
Evidence on whether the writing is totally integrated
The judge considers all relevant evidence
Statements and agreements subsequent to the writing (problem 108 on pg. 461)
After the writing occurs
Evidence to interpret a writing (handout on interpretation)
Evidence shows that a condition to formation of the contract exists (Pym case)
Assessment example and Pym case
E.g.: Agree that contract will not take effect until condition but still sign, the condition made before signing comes into play (condition precedent)
Evidence to show matters of avoidance of contract exists
Duress, fraud, mistake, etc.
Is it a final statement of the parties?
Is the final writing a total or partial integration?
Total: The writing is the total and a complete written statement of the parties. The result is that the writing can’t be contradicted by extrinsic evidence, neither can it be supplemented by CATS. Jury will not be allowed to hear any parol evidence
Partial: The writing is the final expression of the parties relating to the terms included in the writing, but not to other terms not included in the writing
The result is that the writing can’t be contradicted but may be supplemented by consistent additional terms (CATS). Jury will be allowed to hear evidence of consideration of consistent additional terms to supplement the writing. No evidence of contradictory terms will be allowed.
Shed Agreement example from week 1 multiple choice: When the judge determines the written agreement is partially integrated the buyer will be able to introduce evidence of the shed agreement if the court determined the shed agreement is a term that might naturally be omitted from a land sale contract.
E.g.:Andy writes Bonnie a letter offering to contract with her. The letter contains 4 provisions. Bonnie replies agreeing to 3 of the provisions but makes a counter proposal for the fourth provision. During a subsequent phone call they agree on a revision to the fourth provision, but don’t discuss the other 3 provisions at all. This is a partial integration as it was intended to be the party’s final agreement as to the 3 provisions but it was not intended to be the final agreement as to the 4th
Unintegrated: The writing is not the final expression of the parties, but merely reflects preliminary negotiations
E.g.: a draft document
As a result, the PER doesn’t apply at all. Jury may consider all relevant evidence in determining the terms of the agreement
Example: Situations which PER wouldn’t apply
Buyer wants to introduce evidence that his acceptance to a contract for the sale of seller’s home was entered into under duress
Retailer wants to introduce evidence that manufacturers “acknowledgement of purchase order” was not in response to an actual purchase order and the parties never contracted.
Seller wants to introduce evidence that her contract with buyer which was reduced to writing was modified to adjust the date of performance.
When you have an integrated writing (as determined by the judge) the judge has a number of tests which he/she can use to determine whether there is a total or partial integration.
Williston’s view (common law – services and sale of land)
If a merger integration clause exists, presume integration is TOTAL, unless merger integration clause obtained by fraud, mistake, etc.
If there is no merger interpretation clause, ASK: would it have been natural for the parties to have included it in the writing
If yes: total integration
If no: partial integration
Not looking at the major intent of the parties but intent of the parties but intent is presumed using reasonable person standard
Theory adopted by restatement I and became majority view
UCC 2-202 (sale of goods)
Assumes that the writing is a partial integration unless the judge determines that the writing was intended to be a complete and conclusive statement of all the terms of the contract (total integration)
The te
relevant
E.g.: Horsemeat sale contract calls for a minimum 50% protein but both parties know that 49.5% is treated as the equivalent to 50%. This would be ok in regards to interpretation.
Ambiguity (can be more then one solid answer – more then one interpretation)
“All natural ingredients” – ambiguous in its face and use of the standards of the “natural ingredients act” is a reasonably susceptible interpretation of the agreement under the circumstances.
E.g.: Bonnie and Andy enter into an integrated, written contract whereby Bonnie has agreed to sell and Andy has agreed to buy “Bonnies horse” but she has two horses
The judge would likely find that there was an ambiguity here, and the evidence would not be contrary to the writing.
Barter agreements: Trading goods or services without the exchange of money
When there is a barter agreement and the exchange of money was included in the agreement rather then the bargained for exchange would the plaintiff be able to introduce evidence as to the barter agreement?
Assuming the court finds the agreement partially integrated: Yes. If the court finds that the barter agreement is one that would naturally be omitted from the property conveyance documents.
Assuming that a clause claiming that “the parties to this contract hereby affirm that this writing expresses the final, complete, and exclusive statement of the terms of their agreement…”: It would make it more likely that the agreement would be found totally integrated than would be the case without the language.
Conditions and Promises (substantial performance and anticipatory repudiation)
Promise: a contractual undertaking which leads to liability for damages if breached (I promise)
A manifestation of intent to act or refrain from acting in a specified way, so made as to justify a promise in understanding that a commitment has been made
