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PAROL EVIDENCE RULE

Purpose
The purpose of the rule is grounded in a desire to give heightened significance to the written agreement of the parties over their oral representations and agreements, as well as their last agreement over their earlier writings and negotiations.
PAROL EVIDENCE RULE

Substantive rule or Evidentiary Rule
a substantive rule of contract law more than a rule of evidence.  The PER actually determines the terms of the contract, not merely what evidence will be considered or admissible.  
PAROL EVIDENCE RULE

The rule
UCC § 2-202; Restatement §§ 209-222

If a writing is a final expression of an agreement between the parties, then the parol evidence rule applies.  Where a court finds that the parties have expressed their contract in a completely integrated written agreement, then the court will not consider extrinsic evidence of prior or contemporaneous oral or written exchanges [parol evidence] for the purpose of adding, contradicting or modifying the terms.

If the writing is found to be a final but not a complete statement of the parties agreement [partial integration], then a party may introduce evidence of additional, consistent terms.
PAROL EVIDENCE RULE

Inapplicability
The parol evidence rule is a substantive rule, determining the terms of an agreement.  Therefore, it is inapplicable to formation issues: mistake, fraud, lack of consideration, contractual intent, undue influence, unconscionability, illegality.  It usually is inapplicable to proving existence of a condition precedent to contract formation.
PAROL EVIDENCE RULE

Definitions and Concepts

Integration
a final embodiment of the terms of an agreement.  Restatement § 209(3), § 210
PAROL EVIDENCE RULE

Definitions and Concepts


Partial integration
final and complete as to certain terms but not as to all terms or details of the agreement.  I.e., a contract may be integrated as to its price term ($1,000) but not as to a description of the services provided (i.e., does “residential housekeeping, including windows, floors, and laundry" include cleaning the home office room?)  See Restatement § 216.
PAROL EVIDENCE RULE

Definitions and Concepts

Total/complete integration
final and complete as to the entire agreement.
PAROL EVIDENCE RULE

Definitions and Concepts

Independent agreement
An independent agreement supported by separate consideration is always admissible without regard to the rule.

Evidence of a collateral agreement that is not supported by separate consideration may be admissible in a partially integrated agreement if it is the type that would have been omitted from the agreement.
PAROL EVIDENCE RULE

Definitions and Concepts

Williston vs. Corbin
Both the Restatement and UCC favor a more liberal approach to parol evidence. The strict, Willistonian view is that when there is a partially integrated writing, additional terms or side agreements can only be considered if they are of a type which would naturally/ordinarily have been excluded from the agreement.  This allows less parol evidence than Corbin's view.

The liberal, Corbin view is that additional terms or side agreements will be considered unless they are of the type that would certainly have been included in the agreement.  This allows in more parol evidence that Williston's view.  Masterson v. Sine
PAROL EVIDENCE RULE

Is the agreement partially or totally integrated?

A merger clause
a clause that recites that the agreement is complete, that it represents the entire agreement between the parties and that this agreement supersedes any other prior written or oral agreements or representations.

1. Liberal view:  this clause is merely evidence (but not conclusive evidence) of the intent of the parties to integrate the document.

2. Conservative view:  the four-corners rule, a merger clause demonstrates, on the face of the document, that the parties intended to have an integrated agreement.
PAROL EVIDENCE RULE

Is the agreement partially or totally integrated?

Can a document without a merger clause be integrated?
Yes.  A detailed, complex agreement can be determined to be totally integrated from its apparent completeness.  The liberal view allows in extrinsic evidence to prove whether an agreement is integrated.  The stricter view discerns it from the "four corners" of the document.
PAROL EVIDENCE RULE

The judge's role  
Williston -- four corners.  Trial judge decides, based on the language of the contract, whether this is a final expression and whether it is an integrated document.  The judge then decides whether the jury should hear the extrinsic evidence.

Corbin -- trial judge should consider extrinsic evidence as it decides whether a writing is integrated.  If deemed integrated, don’t allow the evidence to go to the jury. 
PAROL EVIDENCE RULE

The analysis

1)
2)
3)
4) 
1) Is the contract integrated?  Did the parties intend this writing as a final expression of their agreement?

2) Is the agreement partially or totally integrated?  Did the parties intend this to be a complete and final expression of their agreement?

3) What is contradictory/inconsistent

4) May extrinsic evidence prove whether the agreement is integrated?
PAROL EVIDENCE RULE

The analysis

1)
2)
1) Is the contract integrated?  Did the parties intend this writing as a final expression of their agreement?

If not, then all evidence of the agreement can be considered to show and define the agreement.

If yes, then do not admit evidence that contradicts the written terms.  Next decide if that is complete or partial integration.

2) Is the agreement partially or totally integrated?  Did the parties intend this to be a complete and final expression of their agreement?

If partially integrated, you may consider additional, consistent, non-contradictory terms and side agreements unless they would certainly have been included (modern).  Or only if they would naturally have been placed in a separate agreement (strict).

If completely integrated, you may not admit evidence of additional or contradictory terms.  Parol evidence can still be considered to refute formation.  Parol evidence can still prove a collateral agreement supported by separate consideration.
PAROL EVIDENCE RULE

The analysis

3)
4) 
3) What is contradictory/inconsistent?  If it merely limits or qualifies a term, but doesn't negate it, some jurisdictions would allow it, others would say that narrowing/limiting a broad term is contradictory.

4) May extrinsic evidence prove whether the agreement is integrated?  Liberal jurisdictions say yes.  Hold a preliminary hearing in front of the judge to consider whether the parol evidence proves the document integrated or not. In a stricter jurisdiction, the judge relies on the four corners of the document to make that determination.
PAROL EVIDENCE RULE

Definition
The parol evidence rule is a substantive common law rule in contract cases that prevents a party to a written contract from presenting extrinsic evidence that discloses an ambiguity and clarifies it or adds to the written terms of the contract that appears to be whole.
PAROL EVIDENCE RULE

UCC § 2-202
the PER applies when there is a writing that is a final expression of an agreement between the parties Terms in the writing (intended by the parties as a final expression of their agreement) cannot be contradicted by evidence of any prior agreement or side oral agreement. However, terms may be explained by:
  • Course of dealing
  • Course of performance
  • Usage of trade
  • Evidence of consistent additional terms
PAROL EVIDENCE RULE

Masterson v. Sine (1968)

Fact
Issue
Holding

Facts: π’s transferred real property to the Δ’s by deed reserving an option to repurchase.  After the death of π’s bankrupt husband, π brought action to determine her right to exercise the option.  

Issue: When a term is such that it must necessarily be included in the agreement, is the K integrated w/ respect to that term?

Held: No
• The parol testimony as to the limitation of assignment should have been admitted since that term would not necessarily have been included.  The parol testimony as to the other terms was properly admitted to explain the meaning of terms not clear on the face of the instrument.
PAROL EVIDENCE RULE

Thompson v. Libby (1885)

Facts: Thompson (P) owned logs of poor quality marked ‘H. C. A.’ lying in the Mississippi river and sold them to Libby (D). The agreement was a brief paragraph reciting the cost and markings on the logs and provisions for payment. Libby refused to accept the logs and Thompson sued. D claimed that P breached an oral warranty regarding the quality of the logs. At trial D presented testimony to prove the warranty over P’s objection. Judgment was entered for D and P appealed. Issue: 1) Can parol contemporaneous evidence be used to contradict or vary the terms of a valid written contract? 2) Under what conditions is the admission of parol evidence admissible? Holding and Rule: 1) No. Parol contemporaneous evidence is inadmissible to contradict or vary the terms of a valid written contract. 2) To justify the admission of parol evidence, the evidence must relate to a subject distinct from that to which the writing relates. If a writing contains on its face a complete expression of the whole agreement, i.e. it includes terms sufficient to render it legally binding, it is presumed that the parties have introduced into it every material item and term, and parol evidence cannot be admitted to add additional terms to the agreement even if that evidence relates to a matter not addressed in the contract. The rule does not apply however where the writing is incomplete on its face and does not purport to contain the whole agreement.
PAROL EVIDENCE RULE

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