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Welcome to my Law blog specifically intended as an aid to law students. I will post comments and white papers, from time to time, and I am happy to carry on conversations with students who are in need of help in law school.


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I am a Professor of Law at Concord Law School, an Internet Law School located in Los Angeles, though I live, teach and otherwise work out of Lakewood, Colorado, resting up against the foothills just west of Denver.

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Friday, April 23, 2010

12 - Contracts – Formation (Defenses – Parol Evidence Rule)

12 - Contracts – Formation (Defenses – Parol Evidence Rule)
PLEASE NOTE THAT THE FOLLOWING IS TAKEN FROM SOME OF MY CLASS NOTES, SOME OF WHICH IS MY OWN PERSONAL WORK AND SOME OF WHICH BELONGS TO CONCORD LAW SCHOOL.  IT IS POSTED TO HELP MY IL STUDENTS IN PARTICULAR.  IT CANNOT BE DISSEMINATED WITHOUT EXPRESS, WRITTEN PERMISSION.

Last time in contracts, we finished looking at the defense of the statute of frauds. Now we move to the parol evidence rule (PER).

First – it is spelled “parol.” No “e” on the end. We are not letting someone out of prison early. Parol, in general, means “oral.” Second – it is pronounced “pah ROLL” with the emphasis on the “roll.” It is not pronounced “pear ol” with the emphasis on the “pear.”

Remember that some contracts must be in writing – the statute of frauds. So if you have a legitimate writing, you do NOT have a SoF problem. On the other hand, if there is no writing, generally, you don't have to worry about the PER.

Also, technically, the PER is not a defense so much as it is a rule of evidence, but always consider it a defense on a contracts exam.

Here is the basic rule for the PER: a writing, intended to be a final embodiment of an agreement, may not be contradicted by certain kinds of evidence. Next you will have to pay particular attention and time to the following rules to be able to answer a PER question:

     1. An integration is defined as a writing that is a final embodiment of an agreement (Rest. 209).
     2. A writing that is final is an integration of the terms embodied in it.
     3. When a writing is final and complete, it is a total integration.
     4. A writing that is final, but which does NOT completely express the parties' contract, is a partial integration.
     5. A partial integration may not be contradicted by "parol" evidence, but may be supplemented by consistent, additional terms.
     6. A total integration cannot be contradicted by parol evidence and cannot be supplemented by consistent (non-contradictory), additional terms.
     7. The rule applies to terms agreed upon prior to, but not subsequent to the agreements. Whether the rule applies to contemporaneous agreements is disputed. The majority rule is that the rule applies to contemporaneous agreement.

Here's how to handle the PER:

     1. State the rule.
     2. Did the parties intend the writing to be a FINAL integration?
     3. If so, is the integration partial or total (complete)?
          a. If partial, the agreement may NOT be contradicted by prior or contemporaneous agreements, but MAY be supported by consistent (non-contradictory) additional terms.
          b. If total, the agreement may NOT be contradicted OR supplemented by prior or contemporaneous agreements.

NOTE: ANY RELEVANT EVIDENCE IS ADMISSIBLE TO SHOW THAT THE WRITING WAS NOT INTENDED TO BE FINAL (DETERMINED BY THE JUDGE AS A MATTER OF LAW).

          c. To determine if an integration is total:
               i. Four Corners Rule – only look at what is written in the contract – within the four corners of the page.
               ii. Collateral Contract Rule (independent agreements are admissible so long as they do not contradict the main agreement)
iii. Williston Rule (1st Restatement)

          (a) Merger clause conclusively establishes total integration UNLESS (1) the document is obviously incomplete or (2) fraud or mistake.
          (b) Absent a merger clause, look to the writing.
          (c) If the writing appears to be complete, it is a total integration unless the alleged additional terms were such that parties in the position of those to the written agreement would usually enter into a separate agreement with regard to the additional terms.
               iv. Corbin (Modern Trend)  Use the reasonable person approach to search out the actual intent of the parties. Use all evidence surrounding the making of the contract.
          v. UCC Rule (2-202)  A final expression of an agreement with respect to such terms as are included therein may NOT be contradicted by evidence of any prior agreement or any contemporaneous oral agreement, but may be explained or supplemented:
               (a) By course of dealing or usage of the trade or by course of performance; and
               (b) By evidence of consistent, additional terms UNLESS the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement.

NOTE: THE PAROL EVIDENCE RULE DOES NOT APPLY UNTIL IT IS DECIDED THAT THERE IS A CONTRACT.

This finishes the Topic of Contract Formation for now. Later, I will talk about the whole area of contract remedies – damages. Next, we’ll dive into the second phase of contracts – Contract Performance.

Professor Doug Holden
© 2010. Douglas S. Holden. All Rights Reserved.

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