Parol evidence rule

Question 1

Scope of application

Answer 1

If the agreement is integrated, the parol evidence rule bars admission of prior or contemporaneous statements or writings related to the agreement.

The rule does not apply to:

(1) Evidence relevant to defenses to formation;
(2) Evidence of a collateral, separate deal; or
(3) A prior communication designed to interpret an ambiguous term in the final agreement.

Question 2

Integration: common law

Answer 2

At common law, a merger clause is evidence of complete integration.

But if the extrinsic term at issue would “naturally be omitted” from the writing, evidence of the extrinsic term is admissible.

Question 3

Integration: UCC

Answer 3

The UCC presumes that a writing is, at most, a partial integration—unless the parties would have certainly included a disputed term in the writing.

Question 4

Interpretation of unambiguous terms: UCC

Answer 4

When the terms of a written contract for the sale of goods appear to be unambiguous, a party may still explain the terms with evidence of:

• trade usage,
• course of dealings, or
• course of performance.

“Consistent” evidence includes usage except that which completely negates express language.

Question 5

Interpretation of ambiguous terms

Answer 5

Evidence may be admitted for the purpose of interpreting or clarifying an ambiguity in the agreement.

Under the UCC, hierarchy for contract interpretation is as follows:

(1) Express terms;
(2) Course of dealing;
(3) Trade usage.

Question 6

Scope of application: subsequent negotiations

Answer 6

Only evidence of prior or contemporaneous negotiations is subject to the parol evidence rule.

Evidence of negotiations conducted after the execution of the written contract is not prohibited by the parol evidence rule—and may be offered, e.g., to prove subsequent modifications.

Question 7

Partial integration

Answer 7

If the writing sets forth the parties’ agreement about some terms, but not all terms, then it is a partial integration.

• The parties are then permitted to introduce supplementary extrinsic evidence (oral or written) of other terms,
• as long as the evidence is consistent with the writing, but not if the evidence contradicts the terms of the writing.

Question 8

Interpretation of ambiguous terms

Answer 8

Parties may seek to admit evidence for the purpose of interpreting a contract, including the clarification of an ambiguity.

By contrast, the parol evidence rule applies when extrinsic evidence is offered to supplement a contract.