Contracts: Parol Evidence Rule and Interpretation

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Contracts Parol Evidence Rule and Interpretation

• Anglo-American Law 2003

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Which contracts must be in writing? (Statute of
Frauds)

• Convey (i.e. transfer title to) land
• Suretyship (answering for the debt or default of
  another)
• Contracts which by their terms are not to be
  performed within one year
• Promise in consideration of marriage
• Contract for sale of goods

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Parol Evidence Rule I

• Bars evidence relating to terms agreed (orally or
  in writing) on prior to integrated writing
• Bars evidence of terms agreed on orally at time
  of creation of written agreement
• Policy encourages complete, clear written
  agreements, minimizes disputes. Also
• When parties intend a writing to be final and
  complete, we should enforce their desire to
  supersede all previous written agreements
• Writing should be privileged over contemporaneous
  oral agreements (discourages perjury).

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• A total integration that is, a contract which
  the parties intend to be final and complete may
  not be contradicted or supplemented.
• A partial integration (a writing which the the
  parties intend to be final but not complete) may
  not be contradicted, but may be supplemented by
  additional terms.

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How to tell whether Integration is Total

• Merger Clause
• Contract appears to be total integration, but no
  merger clause.
• Willistons view would it have been natural
  for the parties to have negotiated a side
  agreement?
• If no, contract is total integration, and no
  parol evidence admissible.
• If yes, additional terms which are consistent may
  be supplied by parol evidence.
• Note Parol Evidence Rule does not bar evidence
  of subsequent agreements supported by independent
  consideration

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Interpretation Rules Part I

• Applied in 2 settings
• ascertain whether a proposed additional term is
  contradictory/complementary (for statute of
  frauds purposes
• Resolve disputes over meaning of contract terms

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Interpretation Rules Part II

• Plain meaning
• Course of dealing/course of performance
• Usage of trade
• Under modern common law, course of dealing and
  trade usage can trump plain meaning
• U.C.C. changes this.