What is the Parol Evidence Rule?
In general, the parol evidence rule prevents the introduction of evidence of prior or contemporaneous negotiations and agreements that contradict, modify, or vary the contractual terms of a written contract when the written contract is intended to be a complete and final expression of the parties’ agreement. A merger clause strengthens the presumption that the written document is complete and final by expressly stating that the written document is the final and full expression of the parties’ agreement. Thus, even if the parties later agree that they had a conversation creating, for example, a “side agreement” that was not included in the original written contract, and the side agreement contradicts the written contract (e.g., by changing the delivery date or price of a purchase), the additional or different terms included in the side agreement may not be enforced by the court when there is a merger clause in the written contract.
There are some exceptions to the parol evidence rule. Evidence of the following is admissible:
1. Defects in the formation of the contract (such as fraud, duress, mistake or illegality).
2. The parties’ intent regarding ambiguous terms in the contract.
3. Problems with the consideration (e.g., the consideration was never paid).
4. A prior valid agreement that is incorrectly reflected in the written instrument in question.
5. A related agreement, if it does not contradict or change the main contract.
6. A condition that had to occur before contract performance was due.
7. Subsequent modification of the contract.
THE STATUTE OF FRAUDS [4319]
����� Statute of Frauds: A statute which requires certain types of contracts to be in writing in order to be enforceable.
� Although statutes of frauds vary somewhat from state to state, the following types of contracts must be in writing to be enforceable:
(1)�� contracts for the sale or lease of, or a mortgage on, real property (e.g., land, fixtures);
(2)�� contracts that cannot, by their terms, be performed within one year after the date the contract was formed;
(3)�� collateral contracts, such as promises to answer for or guaranty the debt or duty of another person;
(4)�� promises made in consideration of marriage (i.e., prenuptial agreements); and
(5)�� contracts for the sale of goods valued at $500 or more.
THE STATUTE OF FRAUDS: EXCEPTIONS ucc2-201/4319.04
����� Exceptions to the Statute of Frauds: A contract which might otherwise be unenforceable because it is not in writing may be enforced to some degree as follows:
� Partial Performance Accepted: If a buyer has taken partial possession of real or personal property and paid that part of the contract price attributable to the property received, and if the parties cannot be returned to their pre-contractual positions, a court may order that the remainder of the contract be specifically performed -�that is, performed according to the precise terms of the contract.
����� Under the Uniform Commercial Code, an oral contract is enforceable to the extent that the seller has accepted payment or the buyer has accepted delivery of the goods covered by the oral contract.
����� Promissory Estoppel: If a promisor makes a promise on which the promisee justifiably relies to the promisee�s detriment, the promisor may be estoppedfrom denying the existence and validity of the contract.
THE STATUTE OF FRAUDS:
SUFFICIENCY OF THE WRITING
����� A written contract, signed by both parties, satisfies the requirements of the statute of frauds. What else will suffice?
� A writing signed by the party against whom enforcement is sought;
����� A confirmation, invoice, sales slip, check, or fax, or any combination thereof; or
� Several documents which, in combination, provide the terms for an agreement.
����� An agreement does not need to be signed at the bottom, but may be signed anywhere on the agreement; moreover, initials will suffice where there is no signature.
����� The writing(s) need only contain the essential terms of the contract: name of the parties, subject matter, quantity, and consideration.
����� Whether price is an �essential� term depends on the type of contract in question.
THE PAROL EVIDENCE RULE� 4320
������ Parol Evidence Rule: A substantive rule of contract law under which a court will not admit evidence of the parties� prior negotiations, prior oral or written agreements, or contemporaneous oral agreements if that evidence contra�dicts or varies the terms of a written contract.
����� Integration: The determination of whether parol evidence will be considered revolves around the court�s determination of whether the written contract is integrated -- that is, if it constitutes the final expression of the parties� agreement.
THE PAROL EVIDENCE RULE: EXCEPTIONS 4320.04
>���� Courts have recognized numerous exceptions to the operation of the parol evidence rule. In addition, there are certain statutory exceptions which apply to contracts under the Uniform Commercial Code. Among the better-established exceptions are the following:
����� Evidence of subsequent modification;
����� Evidence of mistake, fraud, or misrepresentation in the formation of the written contract;
����� Evidence which may resolve an ambiguity and/or fill in a missing term or condition in the written contract;
����� Evidence of prior dealing between the parties, usage of trade in the relevant locale and/or trade, and course of performance under the contract by the parties;
����� Evidence of an oral condition precedent to the written contract; and
����� Evidence of an obvious or gross clerical error.