The Parol Evidence Rule

• Step 1: Do we have some type of Integration (Agreement)?

• Step 2: Does the Parol Evidence Rule apply?

Do we have some type of Integration (Agreement)?

Does the Parol Evidence Rule apply?

(1) Complete Integration
(2) Partial Integration
(3) Non-Integration

(1) Course of Performance
(2) Course of Dealing
(3) Usage of Trade

o a sequence of conduct between the parties to a particular transaction that exists if:
(1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and
(2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.

(1) the agreement of the parties with respect to the transaction involves repeated occasions for performance by a party; and

(2) the other party, with knowledge of the nature of the performance and opportunity for objection to it, accepts the performance or acquiesces in it without objection.

o The parties to an agreement know best what they meant, and their action under it is often the strongest evidence of their meaning. But such "practical construction" is not conclusive of meaning

• A sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.

• Rest. 210(1)
• A writing that is final and complete – final understanding of the parties of every term of their agreement
• Not allowed to bring in External Evidence to show any contradictory or additional terms
• Simply put, bars the evidence

• a writing that is final on some, but not all, of the terms
• P.E.R. bars the evidence for Contradictory terms, but NOT for Additional terms

• Example: price quote, price sheet, advertisements

The P.E.R. does NOT bar evidence for Contradictory or Additional terms.

(1) Did the parties intend it to be final?
(2) Did the parties intend it to be complete?

1a. What evidence can be used to decide if a writing is integrated?
1b. What weight should the types of evidence be given

2. Role of collateral agreements

No, the P.E.R. does NOT apply to collateral matters/agreements (R216).

(1) Doesn’t apply to something used to explain meaning (interpretation)(R214(c) – you are not finalizing anything so the P.E.R. cant apply.)
(2) Doesn’t apply to evidence used to determine whether a document is integrated or what type of integration (integration exception).
(3) Doesn’t apply to agreements after the contract has been signed.
(4) Doesn’t apply to evidence introduced to show the contract is invalid
(5) Doesn’t apply to oral condition precedent.
(6) Doesn’t apply where equitable remedies are sought (Don’t worry about what this means (per Josh)).

o The existence of the prior agreement may be a circumstance which sheds light on the meaning of the integrated agreement, but the integrated agreement must be given a meaning to which its language is reasonably susceptible when read in the light of all the circumstances.

b. Interpretation. Words, written or oral, cannot apply themselves to the subject matter. . . . Even though words seem on their face to have only a single possible meaning, other meanings often appear when the circumstances are disclosed. . . .

d. Ambiguity and contradiction. . . . There is no requirement that an ambiguity be shown before usage can be shown, and no prohibition against showing that language or conduct have a different meaning in the light of usage from the meaning they might have apart from the usage. The normal effect of a usage on a written contract is to vary its meaning from the meaning it would otherwise have.

6. A and B enter into a contract for the purchase and sale of "No. 1 heavy book paper guaranteed free from ground wood." Usage in the paper trade may show that this means paper not containing over 3% ground wood

Stage 1: Plain Meaning (question of law)

Stage 2: Resolve the ambiguity (question of fact)

Applies when someone is trying to contradict or add to an integration terms that were agreed to or promised prior to or during the integration (orally or writing).

• Focus on the four corners to decide if it's integrated
• If the writing is clear that it's final – only four corners
• If it's ambiguous whether the document is final – go to Parol
• Merger cClause (“a complete integration”)

• "a complete integration"
• conclusive that a writing is a complete integration UNLESS the document is obviously incomplete on its face (stamp that says “draft”)

• Always consider extrinsic evidence in deciding whether the writing is a partial or complete integration
• Merger clause – only a factor in this consideration
• Similar to contextualism

R216 = exception to R210

(1) Big 3 are ALWAYS considered at step one (even in textualist states)
(2) Big 3 are ALWAYS admissible to “add” even to a complete integration
(3) Big 3 relationship to express terms (three versions)

(1) Version 1: Big 3 may not qualify (no contradiction)
(2) Big 3 may qualify (but not override or negate) express terms (Nanakhuli)
(3) Big 3 may completely negate express terms (Tigg)

The word is intended to include full recognition of usage of trade, course of dealing, course of performance and the surrounding circumstances as effective parts thereof

(b) Subject to definitions contained in other articles of [the Uniform Commercial Code] that apply to particular articles or parts thereof:
(3) “Agreement”, as distinguished from “contract”, means the bargain of the parties in fact, as found in their language or inferred from other circumstances, including course of performance, course of dealing, or usage of trade as provided in Section 1-303.”

The Big 3 may be used to explain the language that is there (interpret), or supplement for missing language (add)

o UCC rejects textualism -> no need for patent ambiguity

The Order of Importance is Express Terms; Course of Performance; Course of Dealing; Usage of Trade

• Big 3 may be used unless evidence cannot be reasonably reconciled with Express Terms
• Sub Rule: if can’t reconcile, Exp. Terms win over Big 3.

Any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question. The existence and scope of such a usage must be proved as facts

o Courts are split on whether such testimony is allowed
o Majority view for this class is that such testimony is prohibited, including Arkansas