PAROL EVIDENCE RULE Flashcards
PAROL EVIDENCE RULE
Evidence of prior/contemporaneous agreements aren’t admissible to contradict the terms of a written agreement when all the terms are completely integrated into the 4 corners of the document. The terms of the contract are in the contract. Evidence surrounding the circumstances of the execution of the contract is allowed (fraud, duress, lacking consideration, etc.)
Questions to Ask about Parole Evidence Rule:
a) Is there a written contract? With these cases-yes
b) Is the written contract partially or totally integrated (represents a full and final embodiment of the parties’ understanding)?
c) What did the parties intend? This is a question of law
i) Integration or Merger Clause in contract, it will state “this is the entirety of our agreement”
iii) Read the document and determine if there is a latent/patent ambiguity
(1) Latent (hidden): We take parol evidence
(2) Patent (obvious): no parol evidence
iv) California: let in parol evidence—they say there is no distinction between latent/patent, we allow evidence to show that a term can mean more than one thing
If Contract is Partially Integrated:
Is the proposed language supplementing the partially integrated agreement? Is it collateral to agreement or do they belong in the agreement?
i) If it should have been in the contract, we won’t add the terms
ii) If it’s collateral, it may be a valid agreement
Merger clause
totally integrated contract
Intent of the Parties
We look to the parties’ intent in order to determine whether the contract is totally, partially, or not integrated. A partially integrated agreement can be supplemented.
Parol evidence is not allowed that contradicts any term of the written agreement that is totally integrated (final and complete writing). No terms can be added at all.
(Operation of the Parol Evidence Rule)
Contradictory Evidence
Inadmissible unless it’s determined that there was no intent to integrate the agreement of the parties into writing
(Operation of the Parol Evidence Rule)
Supplemental Evidence
Admissible if the agreement is partially integrated if it is consistent with the writing (doesn’t contradict the terms already there)
(Operation of the Parol Evidence Rule)
Separate Deal
Even when there is full integration, evidence can be offered if shows a collateral contract
(Operation of the Parol Evidence Rule)
Ambiguity
Evidence may be admitted to prove a defense, mistake, failure of consideration, failure of a condition, or to prove that the contract is void or voidable.
i) Majority Rule: 4 corners. If it’s clear on it’s face—no parol evidence allowed. Evidence to show a latent ambiguity is okay (i.e. between two parties, “red meant blue”—evidence of that is okay)
(Operation of the Parol Evidence Rule)
Condition Precedent
parol evidence may be admitted to prove a condition precedent to the existence of the contract.
(Operation of the Parol Evidence Rule)
Subsequent agreements
Parol evidence rule doesn’t apply to evidence of agreements between the parties subsequent to the execution of the writing
(Operation of the Parol Evidence Rule)
Where parties attach different meanings
if parties attach different meanings, the Restatement provides that it will take the meaning attached by one of them, if at the time the agreement was made, that party did not know of any different meaning attached by the other and the other party was aware of the mistake (unilateral mistake).
UCC Parol Evidence Rule, 2-202.
With regard to sales contracts, no evidence is admissible to show prior written or oral agreements. However, a contract can be explained/supplemented by evidence of trade usage, course of dealing, or course of performance. Unless the contract is found to be a complete and exclusive statement of terms, evidence of consistent additional terms may be admitted.
i) Evidence that would naturally be omitted from a contract and does not contradict the terms of the contract would be admissible. Any evidence that contradicts will not be admissible.
Baker v. Bailey
Common Law Parol Evidence Rule
Baileys’ kids own property and give a section to their parents to live on. Kids move away and Bakers move in, Baileys retain their property and have a right to use the property’s well water, but this is an exclusive right (cannot be assigned). They also give Bakers the right of first refusal should the Baileys choose to sell their land. Bakers refuse to allow the well-water right to be transferred, drive the price down, and then refuse when Baileys attempt to sell so that they can buy the property themselves. Baileys claim that they can assign their right to use well water, but to do so they need to introduce parol evidence that would contradict a term in the contract.
i) If an agreement is completely integrated, all prior discussion and agreements are merged into the signed writing, any inconsistencies from negotiations, etc. are not used.
(1) This means courts won’t hear any evidence about the meaning of unambiguous terms within a completely integrated agreement
ii) Legal realist view of the rule: when the court doesn’t want the rule to apply, it will just find a way to make terms ambiguous or that the agreement wasn’t totally integrated.
iii) Court uses four corners approach to determine this is totally incorporated
Masterson v. Sine
Mastersons convey property to Sines and retain a re-purchase option. This option becomes very valuable. Masterson goes bankrupt, creditors want to take that option (valuable asset). Masterson says the option was personal and thus non-assignable. The re-purchase option was for the “same consideration”.
i) Traynor opinion. He allows parol evidence in order to determine whether the parties’ intent was to have the deed be a final/totally integrated agreement. Traynor says “same consideration” is ambiguous, so we need parol evidence to clarify. He also says that the personal nature of the option was a collateral agreement, so evidence should be admitted.
ii) PROF: This is wrong. This was a special deed, a “personal” classification would have been included, so no parol evidence should be allowed. This is Traynor picking a case to be an activist, the logic and reasoning doesn’t make sense.
iii) Implication of the decision—abandon the parol evidence rule entirely.
iv) Rule of the case: A prior oral agreement must be excluded if the written contract is found to be a complete integration; whether the written contract is completely integrated, however, depends on whether there is credible evidence of a prior oral agreement (circular).
v) CA: no distinction between patent/latent ambiguities: allow evidence to show that a term could mean two different things
b) Contrasted with Mitchill v. Lath: Ice house case. Court excluded parol evidence of an agreement that was all but openly admitted to.
i) PROF says this was decided wrong
