Contracts II Outline

Parol Evidence: Parol Evidence Rule (PER): evidence of a prior or contemporaneous agreement is

inadmissible if it would vary or contradict the terms of a totally integrated writing. In order to invoke the PER, it must be shown that the parties intended to adopt the writing as their entire agreement.

The PER is a form of extrinsic evidence. Some evidence has to go through a filter before we can allow it in.

o Extrinsic evidence means anything and everything that can help us out.

PER tells you what comes in. It is an exclusionary rule designed to keep out extrinsic evidence unless that evidence can make it through a series of filters.

The PER is a defense to the enforceability of a contract term.

3 questions to ask: Exceptions1. Does the evidence contradict what we have?

o If it contradicts its out. If it contradicts our contract, it does not come in?o Evidence that contradicts the writing is inadmissible unless it is

determined that there was no intent to integrate the agreement of the parties into the writing.

2. Is the evidence a condition of the contract?o If this happens than this happens.o If so then it comes in every time.

3. Is it a statement subsequent after the contract was made?o In order to meet the parol evidence filter the statement must be made

prior to or contemporaneously to the formation of the contract.o The PER does NOT apply to evidence of agreements between parties

subsequent to the execution of the writing.

Intent of The Parties:o The intent of the parties determines whether there is total, partial, or no

integration. Parol evidence cannot be used to contradict any term of a writing that is the final and complete expression of the agreement between the parties, and no evidence can be introduced as to any additional promises or representations made prior to the time of the writing. A merger clause is evidence of the intent to integrate.

o A partially integrated agreement can be supplemented, but a completely integrated agreement cannot. The rule doesn’t prevent a party from proving that the agreement was not final, any defects in formation, or anything that helps interpret ambiguous terms.

Two Parts of Parol Evidence:o Integration: does the outside evidence/information come in?

Majority of issues with Parol Evidence. This is a matter of law (decided by the judge).

o Interpretation: Form of extrinsic evidence. Designed to keep out evidence unless it makes it through.

Integration: Typically there is information that is damning to one party; if it is “integrated” then

the contract is the totality of the agreement intended by the parties.

Only written instruments intended by both parties as the final expression of the terms of their contract are protected by the PER.

Integration determined from the written instrument:o The most convenient way to reflect parties’ intentions as to the writing is simply

to state this intent in the body of the writing (an integration clause).

Integration determined from extrinsic evidence:o Relevant evidence may be introduced to establish that the parties regarded the

written instrument as the final and complete embodiment of their contract.

There are six strategies to decide integration:1. 4 Corners:

o Judge looks at the contract and determines what is integrated by what is in the contract. If the judge finds that the writing is complete on its face then it is totally integrated.

2. Collateral Contract Concept:o Is the other agreement (in form) collateral?

Collateral: does it support, supplemento Does it contradict an express implied provision of the written

contract?o Would it be one the parties would ordinarily have included in

writing?

3. Williston’s View: Reasonable Person Approacho Merger Clause: if a merger integration clause exists (“This writing

contains all the terms of the agreement of the parties”), presume integration is TOTAL, unless merger integration clause obtained by fraud, mistake, etc.

o If there is no merger integration clause, ask: Would it have been “natural” for the parties to include the term in the writing?

If yes = total integration;

if no = partial integration. Ask this question for each proffered consistent, additional term. Contra to case book, with respect to the parol evidence rule (vs. integration), Williston rejected “Four Corners” and “Collateral Contract” as unworkable. 

o Rejected 4 Corners and Collateral Concept.

4. Corbin’s View: o Look to true intention of the parties and allow judge to look at ALL

relevant, extrinsic evidence. It’s clear that Corbin’s view undercuts the parol evidence rule, and some say is current trend.

5. UCC 2-202: SALE OF GOODSo Presumption of 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 (i.e. a total integration). The test here is whether the parties would have “certainly” included the term in the writing. If the answer is “yes”, the writing is deemed to be a total integration. In addition, note that whether the writing is deemed to be a partial or total integration, it may always be explained or supplemented by course of dealing, usage of trade or course of performance.

6. Restatement II: o It’s a mixture of Restatement I, UCC, and Corbin. Would the parties

regard all the terms as being complete? Is the subject of the Parol Term within the scope? If so, the parol evidence is not coming in. Many courts use this view.

Situations Where Parol Evidence Analysis Is Not Done:o The PER DOES NOT APPLY to or exclude the following information (the

evidence/information is admissible): Evidence on whether the writing is integrated. The judge considers all

relevant evidence to determine whether the writing is integrated Statements/ agreements subsequent to the writing Evidence to interpret a writing Evidence to show that a condition to formation of the contract exists Evidence to show matters of avoidance exists (fraud, duress, mistake,

etc.)