Contract Interpretation: Parol Evidence Rule Flashcards
What is the parole evidence rule?
If K is:
- made in writing;
- w the intent that it embody the final expression of party’s bargain
..then the K is an “integration”
EFFECT of INTEGRATION –> the FOLLOWING are NOT permissible to VARY THE TERMS of the writing:
- any other expressions (written or oral) made prior to the writing
- any ORAL expressions made contemporaneously to the writing
What is the relevance of “complete” versus “partial” integration?
If integration is “complete” –> writing cannot be contradicted or supplemented
If integration is “partial” –> writing may be SUPPLEMENTED by proving CONSISTENT ADDITIONAL TERMS
What is the special UCC presumption re: complete versus partial integrations?
UCC presumes ALL writings are “partial integrations”
What is a “merger clause”?
“merger clause” states that agreement is the complete agreement btwn the parties
What is the effect of a merger clause ?
For large commercial K’s –> will likely be upheld
Modern trend for other K’s –> will be one factor in determining whether K is a complete integration
May a confirmatory memo (under UCC) be a partial integration?
YES, bc it was sent to other party and party was aware of its contents
In general, what falls outside of parol evidence rule?
Rule prohibits admissibility only of evidence that seeks to vary, contradict, or supplement an integration.
Other forms of extrinsic evidence are permissible if they fall outside of this scope.
What is the rule re: parol evidence rule and validity issues?
A party can provide extrinsic evidence to attack validity of K.
Example:
1. formation defects (fraud, duress, mistake, illegality)
- conditions precent to effectiveness –> if a party asserts that there was an oral agreement that the written K would not become EFFECTIVE until a condition occurred, all evidence of this understanding may be offered
What is the rule re: parol evidence rule and collateral agreements/naturally omitted terms ?
“naturally omitted terms doctrine” - evidence of terms that would naturally be omitted is permissible
This applies if the term:
- does not conflict with the written integration; AND
- concerns a subject that similarly situated parties would not ordinarily be expected to include in the written instrument
What is the rule re: parol evidence rule and uncertainty/ambiguity?
If there is uncertainty/ambiguity in written agreement’s terms –> parol evidence may be received to aid interpretation
If meaning of agreement is plain –> parol evidence is NOT admissible
(BUT SEE UCC EXCEPTION for course of performance, course of dealing, usage of trade)
What is the rule re: parol evidence rule and “showing of true consideration”?
extrinsic evidence is admissible to show that consideration was never paid
What is the rule re: parol evidence rule and reformation?
If party alleges facts (ie..mistake) permitting him to reform agreement, parol evidence rule is inapplicable
What is the rule re: parol evidence rule and subsequent modifications of K?
Extrinsic evidence is permissible to show subsequent modifications of K
What is the rule re: additional terms under UCC Art 2?
UCC Art 2 generally follows common law rules, stating that party CANNOT contradict a written K, BUT:
- Party MAY add CONSISTENT ADDITIONAL TERMS unless:
- there is a merger clause;
- courts find from all the circumstances that the writing is intended as a COMPLETE and EXCLUSIVE statement of the terms of the agreement
-ALSO –>
written contracts terms may be EXPLAINED or SUPPLEMENTED by evidence of course of performance, course of dealing, and usage of trade REGARDLESS of whether writing is ambiguous
