Contracts: Contract Terms: Words of the Parties: Parol Evidence Rule

• Words of the Parties

• Parol Evidence Rule – keeps out evidence of a prior agreement (either oral or written) that contradicts a later writing.

• BAR TIP: PER problem requires a writing. If the fact pattern involves an oral agreement, it is a Statute of Frauds problem, not a Parole Evidence Rule problem.

• Exceptions to the Parole Evidence Rule (where the parole evidence gets in)

• To correct a clerical error (typo, transposing numbers, etc.)

• To establish a defense against formation – such as when a party seeks rescission because of a misrepresentation (flaw in the agreement process that lead to the deal)

• To explain a vague or ambiguous term in the written contract – evidence can always come in to show what a term means only if such a term is vague or ambiguous.

• BUT: Plain meaning rule – certain terms are unambiguous, and courts will not create ambiguity that isn’t there.

• Liz Taylor signs a written contract to buy a white wedding dress from Michael Kors. Liz now claims that “white” meant “black.” Can Liz introduce evidence to prove her meaning? NO – plain meaning rule.

• To supplement a partially-integrated writing [a final statement of the terms included, but not a complete statement of all terms agreed to].

• Written lease says nothing about sleeping accommodations. Liz claims that before signing the lease, the manager also promised her that the hotel would “throw in the bridal suite for free.” Can Liz get this promise into evidence? Yes. She can supplement or add to the writing because it doesn’t appear to be complete on its face. It doesn’t say a word about sleeping accommodations.

• Merger Clause: “This contract is limited to the terms herein.” - Treated as evidence that the writing is complete on its face, and therefore cannot be supplemented.

• Under Article 2, merger clause will keep out extrinsic evidence.

• The Parole Evidence Rule has NOTHING to do with what happens after an agreement is reduced to writing [the rules on modifications apply].

• The written lease says nothing about sleeping accommodations. Liz claims that after signing the written contract, the manager promised her that the Ritz would “throw in the bridal suite for free.” Can Liz get this promise into evidence? Yes, but NOT under the Parole Evidence Rule. PER looks backwards. It has nothing to do what happens after the contract has been reduced to writing. The modification rules apply here.