Contracts - Parol Evidence and the Statute of Frauds

  1. Parol Evidence Rule
    1. Meaning
      1. A total integration (a writing that the parties intend to be final and complete) may not be contradicted or supplemented.
      2. A partial integration (a writing that the parties intend to be final but not complete) may not be contradicted but may be supplemented by consistent additional terms.
    1. Types of evidence affected…
      1. Excludes terms agreed upon prior to an integrated writing, whether the terms were written or oral.
      2. Does not exclude terms contained in contemporaneous writings.
    1. Reasons for PER
      1. Contractual - if the parties intend the writing to be final and complete, they intend to supersede their prior agreements.
      2. Evidentiary - sound policy requires that prior and contemporaneous oral agreements are suspect and that the writing deserves a preferred status against potential perjury.
    1. Finality and Completeness
      1. Finality
        1. The crucial requirement is that the parties have regarded the writing as the final embodiment of their agreement.
        2. The more complete and formal the instrument, the more likely that it is intended as an integration.
      1. Completeness
        1. Four Corners Rule (losing favor) - if instrument is complete on its face, it is presumed to be a total integration, judge decides
        2. Collateral Contract Rule (losing favor) -  if the term offered does not contradict the writing, it may be received in evidence
        3. Williston's Rules (best)…
          1. If a writing contains a merger clause, then it is a complete, total integration. However, a merger clause does not prevent enforcement of a separate agreement supported by separate consideration.
          2. Absent a merger clause, determination of completeness is made by judge looking at the writing. If only partial, terms that don't contradict may be introduced into evidence
          3. When an instrument appears complete, it is deemed a total integration unless reasonable persons in the position of the parties might naturally exclude the alleged additional terms from the writing.
        1. Corbin's Rule - admit evidence of prior negotiations to find out whether it was the intent of the parties for the instrument to be complete
        2. UCC 2-202 - A writing is only a partial integration unless the parties actually intend the writing to be a total integration or if it is certain that parties similarly situated would have included the term in the writing. (trade usage may add additional terms if there is confusion)
        3. Restatement - all writings are partial integrations unless the actual intent of the parties can prove that it is a total integration. Additional terms are admissible even in a total integration if…
          1. The alleged agreement is made for a separate consideration
          2. The offered agreement is not within the scope of the integration
          3. The offered terms might naturally be omitted from the writing


    1. Separate Consideration
      1. PER does not prevent proof of a separate oral contract with a separate consideration on both sides, provided it does not contradict the written agreement.
      2. PER also never excludes the evidence of subsequent agreements.


    1. Contradictory Terms
      1. Where it contradicts an express term of the contract
      2. Where it contradicts a merger clause
      3. Where it contradicts an inference that all of the seller's obligations were listed in the contract
      4. Where it contradicts an implied in fact term


    1. Parol evidence is admissible to show that the agreement was never formed or even if formed is void or voidable (sham, unconscionable, illegal, mistake, fraud).


  2. Contract Interpretation
    1. Use of Extrinsic Evidence
      1. Plain Meaning Rule
        1. If a writing or the relevant term has a plain meaning, that meaning must be given effect without resort to extrinsic evidence of any kind.
          1. FORK - Rejected in CA - PG&E (Judge Traynor)
          2. Accepted most other places - Trident (Judge Kozinski)
        1. Parol evidence is excluded.
      1. Restatement
        1. All relevant extrinsic evidence is admissible on the issue of meaning, even if there is an integration and there is no ambiguity.
        2. Where the meanings of two parties do not coincide, the meaning is the meaning of the party who is less at fault (depends on what a party knows or should know)
          1. If both parties are equally at fault, there is no contract since there is a mistake as to a material term.
        1. Parol evidence is admissible on the issue of meaning.
    1. Trade Usage (terms folks should know), Course of Dealing (previous conduct between parties), Course of Performance (conduct during performance)
      1. Trade Usage and Course of Dealing
        1. May be added to the terms of a writing as an additional term if the term is not inconsistent with the agreement. They may also be used on the issue of meaning. They may not be shown to contradict the plain meaning of the language.
        2. UCC 2-202 says these are always admissible.
      1. Course of Performance
        1. May be used to add a term, because it is subsequent to the writing and therefore is not excluded under the PER. The issue becomes modification. May also be used on the issue of meaning.
        2. UCC 2-208 says this is always admissible.
    1. Other Rules
      1. Specific terms are given greater weight than general terms.
      2. Separately negotiated terms are given greater weight than standardized terms
      3. Typed terms prevail over printed terms if there is an inconsistency
      4. Courts tend to want to uphold contracts, so they construe them as lawful and operative if able


  3. Statute of Frauds
    1. Meaning -
      1. Certain types of contracts must be evidenced by a writing.
        1. Obviates perjury, promotes certainty, deliberation, and seriousness
        2. But frustrates honesty, fair dealing, and parties' intent.
          1. Thus, courts have given SOF a narrow construction and have developed devices for looking at a contract outside the SOF
    1. Types of Contracts within SOF
      1. Sale of Real Property
      2. Ks not to be Performed within a Year
        1. By its terms, cannot be performed within one year from its making
        2. If performance is possible within one year (even if unlikely or improbable), not within SOF
        3. Promises of uncertain duration are not within the SOF