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# Session 13 - Parol Evidence Rule

> Comprehensive outline notes on the Parol Evidence Rule covering integration, admissibility exceptions, and major cases

## I. Overview and Core Principles

### A. Definition of Parol Evidence

* **Parol evidence** = any evidence contemporaneous to or prior to the written agreement
* Can be oral or written extrinsic evidence
* Rule determines what evidence is admissible to supplement or contradict written contracts

### B. The Basic Rule

**Parol evidence is generally inadmissible to:**

* Contradict
* Vary
* Add to
* Subtract from

...the terms of an **integrated agreement**

### C. Types of Integration

#### 1. Complete (Total) Integration

* Final AND complete expression of the parties' agreement
* **No extrinsic evidence** admitted to contradict OR supplement
* Merger clauses create presumption of complete integration
* All terms intended to be included are in the writing

#### 2. Partial Integration

* Final expression but NOT complete
* Extrinsic evidence admissible to **supplement** (if consistent)
* **Cannot contradict** any terms in the writing
* Parties intended document as final but not exhaustive

### D. Intent of the Parties - Critical Principle

* Always analyze the **intent of the parties**
* Courts enforce what parties intended, not mechanical rules
* Key question: Did parties intend this document to be fully/partially integrated?
* **Exam tip**: Never go wrong mentioning "intent of the parties" in analysis

### E. The Natural Omission Test

* Would reasonable, competent parties naturally have included this term in the writing?
* If yes, and it's omitted → suggests it wasn't part of the deal OR partial integration
* If term would naturally be included but isn't mentioned → may indicate it wasn't agreed upon

## II. Major Cases

### A. Mitchell v. Lath (1923) - Traditional/Rigid Approach

#### Facts

* Charles Lath agreed to sell farm to Catherine Mitchell (1923)
* Lath owned ice house across the road (Mitchell didn't like it)
* **Written agreement**: Sale of farm
* **Separate oral agreement**: Lath would remove ice house
* After purchase, Lath refused to remove ice house
* Mitchell sued

#### Issue

Whether a separate spoken agreement can be used in court if different from the final written agreement

#### Holding

Oral agreement about ice house **NOT admissible** (reversed lower courts)

#### Rule - Three Conditions for Admissibility

For an oral collateral agreement to be admissible, it must:

1. **In form be a collateral one** (separate agreement)
2. **Not contradict** express or implied provisions of written contract
3. Be one that **parties would not ordinarily be expected to embody** in the writing

Alternative test: Inspection of written contract in light of surrounding circumstances must not indicate that writing contains complete engagements of parties

#### Application

Ice house removal failed the test because:

* Closely related to land sale (not truly collateral)
* Something buyer would naturally include in land purchase contract
* Contract appeared to be complete integration on its face

#### Key Language (Bottom of page 337)

"Two entirely distinct contracts, each for a separate consideration, may be made at the same time, and will be distinct legally"

**BUT**: "If one agreement is entered into, wholly or partly in consideration of the simultaneous agreement to enter into another, the transactions are necessarily bound together"

Test: Is the bond **sufficiently close** to prevent proof of the oral agreement?

#### Significance

* Represents older, more rigid approach
* Later cases adopt more flexible approach (UCC 2-202, Restatement Second § 216)

***

### B. Masterson v. Sine (1968) - Modern/Flexible Approach

#### Citation

* California Supreme Court
* Justice Traynor
* **In Banc** (all justices participated)

#### Facts

* Dallas Masterson and wife owned ranch, conveyed to Medora and Lu Sine (1958)
* Medora was Dallas's sister
* **Grant deed** reserved **option** for grantors to repurchase property within 10 years
* Option exercisable by paying same consideration without depreciation
* Dallas later declared bankruptcy
* Bankruptcy trustee took over estate
* Trustee and Rebecca Masterson sued to enforce option

#### Procedural History

* **Trial court admitted**: Evidence of \$50,000 consideration and depreciation definition
* **Trial court excluded**: Parol evidence that option was **personal to Mastersons** (non-assignable, to keep property in family)
* Both parties appealed

#### Issue

Is evidence of separate oral agreement admissible to prove terms of written contract if unclear whether writing intended by parties to be complete?

#### Holding

* Trial court **erred** in excluding evidence
* Evidence that option was personal/non-assignable **should have been admitted**
* Writing appeared to be **partial integration**
* Oral term was **consistent** with writing (not contradictory)

#### Rule - Justice Traynor's Modern Approach

Even if unclear whether written contract intended to be complete, evidence of separate oral agreement **may be admissible** if:

* Oral agreement is something that would be **naturally made as a separate agreement** by parties
* Given their **actual situation and circumstances** when drafting written contract

#### Reasoning

* **Test of admissibility**: Whether oral term might naturally be made as part of separate agreement by the parties
* Evidence of oral collateral agreements should be **excluded only when fact finder likely to be misled**
* Rule must be based on **credibility of evidence**
* Adopts **Restatement of Contracts § 241B** standard

In this case:

* Agreement that option was personal/non-assignable would naturally be separate
* Intent was to keep property within family
* Not inconsistent with written grant deed
* Partial integration allowed supplementation

#### Significance

* Represents **modern, flexible approach**
* Emphasizes credibility and natural expectations over rigid formalism
* **Still good law today** (1968 case)
* Moving away from Mitchell v. Lath's rigid rule

***

### C. Lee v. Joseph E. Seagram & Sons, Inc. (1977) - Different Parties

#### Facts

* Lee family owned 50% of Capital City Liquor Company (Seagram distributor)
* Family decided to sell business
* **Arnold Lee** (age 36) had relationship with Seagram executives
* **Initial oral offer**: Sell Capital City to Seagram on condition they relocate Arnold and sons into new distributor
* **One month later**: Written sales agreement negotiated by different Seagram employees (John Barth)
* **Written contract** (September 1970):
  * Did NOT include promises about new distribution
  * Contained **NO integration clause**
* Seagram failed to provide new business
* Lees sued for breach of oral agreement

#### Procedural History

* Trial court allowed evidence of oral promise
* Jury ruled for Lee
* Second Circuit affirmed

#### Issue

Can evidence of oral agreement relating to later written contract be admitted when parties are not identical and written contract lacks integration clause?

#### Holding

Oral agreement **admissible** - parol evidence rule did NOT bar evidence

#### Reasoning

* Oral agreement admissible because circumstances showed it was **not meant to be part of written sales contract**
* **Different parties** involved:
  * Oral: Arnold Lee and Seagram executives
  * Written: Different Seagram representatives
* No evidence that those drafting written contract even knew of earlier oral promises
* Written agreement was **not total integration**
* Oral promise did **not contradict** written agreement
* Therefore admissible

#### Rule Applied

* Court applied **Corbin approach**
* Emphasized **intent of parties** rather than reasonable interpretation
* Different parties = significant factor
* Absence of integration clause weighs against complete integration

***

### D. George v. Davoli (1977) - UCC 2-202 Application

#### Facts

* George agreed to purchase jewelry from Davoli for \$500
* **Written memorandum**: Can return jewelry if doesn't like it, get refund
* **NO time period specified** in writing
* **Oral discussion**: No time period mentioned
* George returned jewelry **following Wednesday**
* **Davoli refused refund**, claiming oral agreement required return by **Monday**

#### Issue

Is oral testimony about Monday deadline admissible under UCC 2-202?

#### Holding

* Evidence of Monday deadline **admissible**
* George **failed to meet deadline**
* Davoli not required to provide refund
* Complaint dismissed

#### Rule - UCC 2-202

**UCC 2-202 compels court** to allow oral testimony supplementing written agreement where:

1. Terms **not inconsistent** with written agreement, OR
2. Writing **not intended as complete and exclusive** statement of terms

Supplemental terms admissible if:

* Written agreement not full and exclusive expression
* Supplemental terms not inconsistent

#### Application

* Memorandum was **not full and exclusive** (no time period included)
* Deadline agreement **not inconsistent** with written memorandum (merely supplemented)
* Appellate Division: Must **contradict very existence** of term to be inconsistent
* Oral Monday deadline did not contradict, only supplemented
* **Therefore admissible**

#### Key Quote (Page 357)

"Section 2-202 of the UCC **compels the court** to allow oral testimony supplementing the written agreement were not inconsistent, or where the writing is not intended as complete and exclusive statement of the terms of the agreement"

#### Significance

* Demonstrates UCC's liberal approach to parol evidence
* Time period for performance can be supplemented by oral evidence
* "Inconsistent" narrowly construed

***

### E. Frigaliment Importing Co. v. B.N.S. International Sales (Chicken Case)

#### Judge

Judge Friendly (noted for being "friendly to the chicken")

#### Facts

* Breach of warranty case - goods should correspond to description
* Two contracts: "U.S. fresh frozen chicken, grade A, government inspected"
  * Specification 1: 2.5 to 3 pounds each
  * Specification 2: 1.5 to 2 pounds each
* **Plaintiff's interpretation**: "Chicken" = young chickens (broilers/fryers) only
* **Defendant's interpretation**: "Chicken" = any chicken (including stewing hens)

#### Issue

What is the meaning of the word "chicken" in the contract?

#### Extrinsic Evidence Examined

**1. Communications Between Parties**

* Mostly cablegrams in German
* German word included both broiler and stewing types
* Inconclusive

**2. Trade Usage**

* Plaintiff's witness (Strassner): "Chicken" means broiler
  * BUT his own contracts specified "broiler" separately
* Defendant's witnesses:
  * Plant operator: "Chicken is everything except goose, duck, and turkey"
  * Must specify which category wanted
  * Food inspection service: Any bird within USDA classes = "chicken"

**3. USDA Regulations**

* § 70.301: "Chickens" includes broiler, fryer, roaster, capon, stag, hen, etc.
* Defendant: Contract incorporated these by "government inspected" language
* Court: Defendant's argument has more force

**4. Market Prices**

* Defendant: Impossible to obtain broilers/fryers at 33-cent price offered
* Market price for broilers was 35-37 cents
* Plaintiff must have known market
* Defendant entitled to some profit

**5. Course of Performance**

* Plaintiff sent cables complaining larger birds were "foul"
* Defendant didn't acknowledge complaint
* Mixed evidence

#### Holding

* Defendant believed it was complying (broader interpretation)
* Defendant's **subjective intent coincided with objective meaning** per USDA regulations
* **Plaintiff had burden** of showing "chicken" used in narrower sense
* **Plaintiff failed to sustain burden**
* **Judgment for defendant**

#### Rule - Interpretation When Ambiguous

**Extrinsic evidence admissible to interpret term when ambiguous**

Court examines successive interpretations:

1. Contract language itself
2. Communications between parties
3. Trade usage
4. Industry definitions (USDA regulations)
5. Market prices
6. Course of performance

#### Significance

* **Pre-UCC case** demonstrating courts allow extrinsic evidence for interpretation
* Extensive analysis of ambiguous terms
* If cannot establish meaning of indispensable term → no remedy possible
* **Malpractice warning**: Don't draft contracts with vague terms

***

### F. Pacific Gas & Electric Co. v. G.W. Thomas Drayage

#### Facts

* PG\&E hired Thomas to fix/repair turbines
* Contract included **indemnification clause**: Thomas liable for "any loss, damage, expense, and liability resulting from injury to property"
* While working, Thomas damaged PG\&E's turbine cover
* PG\&E sued for \$25,000 based on indemnification

#### Procedural History

* **Superior Court**: Extrinsic evidence excluded
  * Looked at **plain meaning within four corners**
  * Plain meaning: Applied only to **third party** property, not PG\&E's
* **Appellate Court**: **Reversed**

#### Issue

Can extrinsic evidence be introduced when there's issue understanding plain meaning of language within four corners of contract?

#### Holding

* **Extrinsic evidence admissible**
* If issue understanding plain meaning, court can look to extrinsic evidence to understand **intent of parties**
* Intent was to protect against third party claims, not PG\&E's property
* **Not barred by parol evidence rule**

#### Rule - Language Susceptible to Multiple Meanings

**Definition to memorize**:
"If there is language in the contract that is **susceptible to two or more meanings** \[OR] **reasonably susceptible to two or more meanings**, the extrinsic evidence **can come in** to:

* Show the meaning intended by the parties, OR
* Prove a meaning to which the language is reasonably susceptible"

**Extrinsic evidence can include**:

* Emails regarding contract
* Oral testimony between parties
* Any evidence showing intended meaning

#### Justice Traynor's Limitations

* **Preliminary consideration** by **court** (not jury, not full trial)
* Judge makes preliminary determination
* Bring in all **credible evidence**
* Reviewed solely by judge
* Admission only if, considering all extrinsic evidence, contract susceptible to either interpretation

#### Significance

* If issue understanding plain meaning, extrinsic evidence admissible
* **Not violation** of parol evidence rule - interpretation exception
* Different from consistent/inconsistent analysis

***

### G. Trident Center v. Connecticut General Life Insurance (1988)

#### Court

* **Ninth Circuit** (federal appellate court)
* Applied California law
* Judge: Alex Kozinski

#### Facts

* **Plaintiff**: Trident Center (partnership of insurance company and law firms)
* Borrowed **\$56.5 million** from Connecticut General Life Insurance
* **Promissory note** stated: "Trident **shall not have the right to prepay** principal amount before January 1996"
* **Separate clause**: "In event of prepayment resulting from **default** prior to January 1996, prepayment fee will be **10%**"
* When interest rates dropped, Trident wanted to refinance
* **Trident's argument**: Second clause allowed prepayment if willing to pay 10% fee
* **Lender's position**: Clear prohibition on prepayment during first 12 years

#### Issue

Under California law, can extrinsic parol evidence be introduced to show contract means something different from its plain language, even when contract appears clear and unambiguous?

#### Holding

* **Affirmed dismissal** (contract clearly barred prepayment before 1996)
* BUT **reversed sanctions** - claim not frivolous given California's broad parol evidence doctrine
* Recognized under California law, parol evidence **could theoretically be admissible**

#### Reasoning

* **No genuine ambiguity** in written terms
* Default clause only applied if lender chose to accelerate after default
* Did NOT apply if Trident voluntarily prepaid
* Nonetheless, California's Pacific Gas precedent permits parties to offer parol evidence even when written contract seems unambiguous
* Court **critical of this rule** but bound to follow California law
* California law makes it **impossible** for even sophisticated parties to draft contract immune to parol evidence

#### Court's Criticism

* Contract had "extremely clear contractual provisions"
* Despite this, California law still potentially allows parol evidence
* Even sophisticated parties (insurance companies, law firms) with clear language cannot completely bar parol evidence

#### Significance

* Shows California and Ninth Circuit taking **very liberal approach** to admissibility
* Even clear language may be subject to parol evidence if susceptible to multiple interpretations
* Current trend: Evidence may come in even when language clear on face
* Illustrates tension between plain meaning and liberal parol evidence rules

***

### H. Val-Ford Realty - Evidence Contract is No Contract at All

#### Key Quote (Page 357)

"While parol evidence is generally inadmissible to **contradict, vary, add to, or subtract from** the terms of an integrated agreement (such as the instant lease and guarantee), it is **admissible to show that a writing, although purporting to be a contract, is in fact no contract at all**"

#### Principle

Parol evidence rule does NOT bar evidence showing:

* Contract was fraudulent
* Contract was sham/fake
* No real contract existed (just appearance)
* Contract procured through fraud

#### Example: Fraudulent "Gift" Contracts

Four women each paid \$180K-200K to man who:

* Was dating all simultaneously
* Signed contracts showing money as "gifts" (not loans)
* Purpose: Deceive bank to secure large loan
* Actually were loans, not gifts

**Parol evidence admissible** to show:

* Contracts were phony/fraudulent
* True intent was loans
* Used to fraudulently obtain bank financing
* No real contract - just fraud

#### Example: Fraudulent Conveyance

* Party gets sued, transfers property to spouse/family
* Witnesses heard: "This is to prevent us from losing the property"
* Evidence of sham transfer admissible
* Not subject to parol evidence rule

#### Rule

Anytime evidence shows contract formation defect (fraud, duress, no meeting of minds), evidence comes in - not subject to parol evidence bar

***

## III. UCC 2-202 - Presumption of Partial Integration

### A. Text and Effect

**UCC 2-202 Rule**:
Terms in writing intended by parties as final expression **may not be contradicted** by evidence of prior agreement or contemporaneous oral agreement

**BUT may be explained or supplemented**:

* By course of dealing, usage of trade, or course of performance
* By evidence of **consistent additional terms** UNLESS court finds writing intended as **complete and exclusive** statement

### B. Critical Presumption

**UCC 2-202 PRESUMES all contracts are PARTIALLY INTEGRATED**

* This is rebuttable presumption
* Party can overcome by showing complete integration
* Default position: Partial integration
* **UCC compels court** to allow supplemental evidence

### C. Why UCC is Liberal

**Policy Reasons**:

1. Rigid rules don't fully show intent of parties
2. UCC wants to promote contract formation
3. Recognition that most commercial contracts evolve
4. Reflects reality of commercial dealings

**Practical Effect**:

* Evidence that supplements (if consistent) generally admissible
* Burden on party claiming complete integration to prove it
* Unless party shows fully integrated agreement, supplemental consistent terms come in

***

## IV. Restatement Provisions

### A. Restatement (Second) § 209 - Is Writing an Integration?

* Writing **not assented to** by parties as final expression is **not a final integration**
* Even if labeled "draft" or "preliminary," can become binding if parties assent
* Intent to finalize is key

### B. Restatement (Second) § 216 - Integrated Agreements

* More flexible approach than Mitchell v. Lath
* Referenced in modern cases as new approach
* Less formal than traditional rules
* Post-Mitchell modernization

### C. Restatement § 241B - Collateral Agreement Test

Cited in Masterson v. Sine

Permits proof of collateral agreement if:

* "Such an agreement as **might naturally be made as a separate agreement** by the parties"
* Considering situation parties were in when creating written contract
* Natural omission test

***

## V. When Parol Evidence IS Admissible - Exceptions

### A. To Show Contract is No Contract at All

* **Fraud**
* **Sham/fake contract**
* No meeting of minds
* Illegality
* Contract formation defects
* See Val-Ford Realty

### B. To Interpret Ambiguous or Vague Terms

* Language susceptible to two or more reasonable meanings
* See Frigaliment (chicken case)
* See Pacific Gas & Electric
* **NOT violation** of parol evidence rule - interpretation
* Even in fully integrated contract, can interpret vague language

### C. To Show Modification (Post-Contract)

* Evidence of agreement made **after** contract signing
* Not parol evidence issue at all - modification question
* Requires consideration OR consideration substitute
* No parol evidence bar (not prior to/contemporaneous with contract)

### D. Collateral Agreements

* Must meet tests from Mitchell v. Lath or Masterson v. Sine
* "Naturally made as separate agreement" test
* Not so closely related that would naturally be in main contract
* See Lee v. Seagram (different parties factor)

### E. To Supplement Partially Integrated Agreement

* If contract is partial integration
* Evidence **consistent** with writing
* Cannot contradict
* UCC 2-202 presumes partial integration

### F. Course of Dealing, Course of Performance, Trade Usage

UCC allows evidence of:

* Prior dealings between parties
* How parties performed this contract
* Custom and practice in the trade
* Even if not in writing, helps interpret terms

### G. To Show Condition Precedent to Formation

* Evidence contract not effective until condition occurs
* Goes to formation, not terms
* Not barred by parol evidence rule

### H. To Show Agreement Was Never Final/Complete

* No integration occurred
* Still in draft/negotiation stage
* Parties didn't assent as final expression (Restatement § 209)

***

## VI. Types of Terms and Consistency Analysis

### A. Consistent Additional Terms

* **Admissible** in partial integration
* Must not contradict anything in writing
* Supplements the agreement
* Example: Adding detail not mentioned in contract

### B. Contradictory Terms

* **Never admissible** (whether full or partial integration)
* Cannot contradict express or implied provisions
* Courts strictly enforce this
* Even under liberal California/UCC approach

### C. Terms That Would Naturally Be Included

* Strong evidence of complete integration if omitted
* If reasonable parties would include it, and they didn't → probably not part of deal
* Natural omission test (determines if partial or complete integration)

***

## VII. Integration Clauses (Merger Clauses)

### A. Effect of Merger Clause

* Creates **presumption** of complete integration
* States contract is "entire agreement"
* Typical language: "This agreement constitutes the entire agreement between the parties"
* Raises red flag for party claiming partial integration
* Must overcome presumption

### B. Overcoming Merger Clause

* Not conclusive - rebuttable presumption
* Party can still argue:
  * Despite clause, particular matter not addressed
  * Parties didn't intend clause to cover specific issue
  * Evidence shows intent otherwise
* But difficult to overcome

### C. Example from Lee v. Seagram

* Contract had **NO integration clause**
* Factor weighing toward partial integration
* Absence of merger clause significant in court's analysis

***

## VIII. Problem Sets and Applications

### Problem 1 - Draft Not Final

**Facts**: A and B made oral agreement, signed writing incorporating terms. Not fully satisfied with writing. Agreed to have it redrafted.

**Question**: Does writing constitute integration?

**Answer**: **NO**

* Restatement Second § 209
* Writing not assented to as final expression is not final integration
* Even though signed, parties intended to redraft
* Intent controls

***

### Problem 3 - Construction Loan with Merger Clause

**Facts**:

* Construction loan to build house
* Written contract:
  * **Merger clause present**
  * Stated selection of contractor was "exclusive responsibility of borrower"
* Plaintiff offers evidence of oral agreement:
  * Defendant would help select contractor
  * Guarantee contractor's competence
  * Supervise construction

**Question**: Should evidence be excluded?

**Answer**: **YES**

1. Merger clause suggests complete integration
2. Oral evidence **contradicts** express written provision (borrower's exclusive responsibility)
3. Cannot introduce contradictory evidence even in partial integration
4. If parties intended defendant's responsibility, plaintiff wouldn't have signed contract with contrary term

***

### Problem 6 - UCC Confirmation Memoranda

#### Sub-Problem A

**Facts**: Buyer and seller exchanged correspondence, entered contract for goods. Terms: A (subject matter), B (quantity), C (warranty). Seller sends written confirmation stating terms A and B only.

**Question**: Could buyer prove existence of term C?

**Answer**: **YES**

* UCC 2-202 presumes partial integration
* Confirmation is partial integration
* Term C is consistent additional term
* Admissible to supplement

#### Sub-Problem B

**Facts**: Seller's confirmation states: "A, B, and **not C**" (disclaimer of warranties)

**Question**: Could buyer prove term C?

**Answer**: Complex two-part analysis

1. **Parol evidence analysis**:
   * Term C contradicts confirmation ("not C")
   * If confirmation is integration, term C excluded (contradicts)
2. **Substantive UCC warranty law**:
   * Can you disclaim warranties via confirmation memo?
   * **Likely NO** - substantially limits party's rights
   * Similar to arbitration clause
   * Disclaimer attacks substantive consumer rights
   * Courts won't allow unilateral disclaimer of substantial rights via post-contract confirmation
   * Would be material alteration under UCC 2-207

#### Sub-Problem C

**Facts**: Both buyer and seller sent confirmations with A and B, omitting C

**Question**: Could buyer prove term C?

**Answer**: **YES**

* Both omitted C (didn't actively exclude it)
* UCC 2-202 presumes partial integration
* Can bring in original contract/agreement evidence
* Doesn't contradict confirmations - supplements them
* Shows term was part of original deal

***

### Problem 7 - Sham Contract (Independent Contractor)

**Facts**:

* Plaintiff worked for defendant one year as employee with fixed salary
* Parties then signed document stating plaintiff was **independent contractor**
* New writing: Paid per work done, carry workers' comp insurance
* Plaintiff sues on initial employment contract for unpaid salary
* Offers to testify second agreement **not intended to be binding**
* Purpose was to enable defendant to avoid workers' compensation law

**Question**: Is evidence admissible?

**Answer**: **YES**

* Can show contract was **sham/fraudulent**
* Evidence comes in to show no real contract at all
* Purpose was illegal (evade workers' comp law)
* Not subject to parol evidence bar
* Knucklehead v. Lewis (1939)

***

## IX. Interpretation vs. Parol Evidence

### A. Critical Distinction

#### When It's Interpretation (Always Admissible)

* Language in contract is **vague or ambiguous**
* Term susceptible to two or more reasonable meanings
* Need to clarify what parties meant by specific term
* Example: "Porsche" - which car? model? year?
* Example: "Chicken" - broiler or any fowl?
* **NOT parol evidence issue** - interpretation issue

#### Interpretation in Fully Integrated Contract

* Even if contract is **complete integration**
* Still can bring in evidence to interpret vague term
* Cannot bring in to supplement or contradict
* But CAN bring in to clarify meaning
* Not inconsistent with parol evidence rule

### B. Process for Vague Terms

1. Is there ambiguity/vagueness?
2. If yes, extrinsic evidence admissible
3. Court determines meaning
4. If cannot determine meaning of indispensable term → no remedy possible

### C. Interpretation Example

Contract says "Porsche" but nothing else:

* No model, year, VIN number
* Court would allow extrinsic evidence:
  * What did parties mean?
  * Which car?
  * SUV? Sports car?
* Must interpret before can apply parol evidence rule
* "Figure out what the thing is before we can figure out if it's consistent or inconsistent"

### D. Successive Interpretive Tools (from Frigaliment)

Courts examine in order:

1. Contract language itself
2. Communications between parties
3. Trade usage/custom
4. Industry definitions and regulations
5. Market prices and commercial context
6. Course of dealing/performance
7. Dictionary definitions
8. Expert testimony

***

## X. Exam Strategy and Practice Tips

### A. Essay Writing Approach

#### Always Discuss Intent

* **Never go wrong** mentioning "intent of the parties"
* Don't say "I think" - say "parties intended"
* Safer to argue based on party intent than personal judgment
* Courts enforce what parties intended

#### Standard IRAC Analysis Format

**1. Is this parol evidence?**

* Prior to or contemporaneous with written agreement?
* If after contract → modification, not parol evidence

**2. Integration analysis:**

* Complete or partial integration?
* Look for merger clause
* Apply natural omission test
* What did parties intend?

**3. Consistency analysis:**

* Does evidence contradict or supplement?
* If contradicts: Not admissible (whether full or partial)
* If supplements: Admissible only if partial integration

**4. Exceptions:**

* Is this interpretation of ambiguous term?
* Evidence of fraud/no contract?
* Collateral agreement naturally separate?
* Modification?

#### Conclusion Doesn't Matter

* "Did you state law correctly?"
* "Did you apply facts to law correctly?"
* "If you conclude incorrectly, we don't care"
* "You still get full credit"
* "Your conclusions mean nothing"
* Just spot issue, state rule, apply to facts

### B. Under UCC vs. Common Law

#### UCC Transactions

* **Start with presumption**: Partial integration
* Evidence that supplements (if consistent) likely admissible
* Liberal approach
* Burden on party claiming complete integration

#### Common Law

* More restrictive historically
* Modern trend (Masterson, Traynor) moving toward flexibility
* Still less liberal than UCC
* No automatic presumption of partial integration

### C. Integration Determination

#### If Merger Clause Present

* **Presumption**: Complete integration
* Must overcome presumption to get evidence in
* Difficult but not impossible
* Can argue specific matter not covered

#### If No Merger Clause

* Look to intent of parties
* Natural omission test
* What would reasonable parties do?
* No presumption either way (except under UCC)

### D. Common Pitfalls

1. **Don't confuse interpretation with parol evidence**
   * Vague terms → interpretation (always admissible)
   * Supplementing/contradicting → parol evidence analysis

2. **Don't forget modification**
   * Post-contract agreements not parol evidence
   * Different analysis entirely

3. **Remember UCC presumption**
   * UCC 2-202 presumes partial integration
   * Big advantage for party trying to get evidence in

4. **Contradictory evidence never comes in**
   * Whether full or partial integration
   * Strictly enforced

***

## XI. Professor's Three-Minute Summary

**The Essential Parol Evidence Rule**:

### 1. What is parol evidence?

Any evidence contemporaneous to OR prior to written agreement

### 2. Two questions to ask:

**A. Integration?**

* Complete or partial integration?
* Intent of parties?

**B. Consistency?**

* Does evidence contradict or supplement?

### 3. Simple rules:

**Complete integration**: Nothing comes in (no supplement, no contradict)

**Partial integration**:

* Supplemental consistent terms come in
* Contradictory terms do NOT come in

### 4. Exceptions (evidence always comes in for):

* **Fraud** - show contract was sham
* **No contract** - show no agreement at all
* **Interpretation** - clarify vague/ambiguous term

### 5. That's it!

"Don't read too much into parol evidence. That's the whole crock of parol evidence. Watch this tape, 3 minutes, that's all you need to know."

### 6. What graders look for:

* Did you state law correctly?
* Did you apply facts to law correctly?
* Don't care about your conclusion
* Just IRAC it properly

***

## XII. Key Definitions

### Bolded Terms to Know

* **Integration** - Final written expression of agreement (complete or partial)
* **Complete/Total Integration** - Final AND complete expression; no supplementation or contradiction
* **Partial Integration** - Final but not complete; can supplement (if consistent), cannot contradict
* **Parol Evidence** - Evidence prior to or contemporaneous with written agreement (oral or written)
* **Merger Clause** (Integration Clause) - Clause stating contract is entire agreement; creates presumption of complete integration
* **Collateral Agreement** - Separate agreement related to main contract; may be admissible if "naturally made as separate"
* **Natural Omission Test** - Would reasonable parties naturally include this term? If yes and omitted → wasn't part of deal
* **Consistent Additional Terms** - Terms that supplement without contradicting; admissible in partial integration
* **Extrinsic Evidence** - Evidence outside the "four corners" of written contract
* **Four Corners Rule** - Traditional approach: look only within document (weakened by modern cases)
* **Plain Meaning Rule** - If language has plain meaning, don't look to extrinsic evidence (criticized by Trident)
* **Contemporaneous** - At same time as contract formation
* **Course of Dealing** - Pattern of previous conduct between parties
* **Course of Performance** - How parties have performed this particular contract
* **Trade Usage** - Custom and practice in particular industry
* **Susceptible to Multiple Meanings** - Language reasonably capable of more than one interpretation

***

## XIII. UCC and Restatement References

### UCC Sections

**UCC 2-202** - Final Written Expression

* Terms in writing intended as final expression **may not be contradicted**
* BUT **may be explained or supplemented** by:
  * Course of dealing, usage of trade, course of performance
  * **Consistent additional terms** (unless writing intended as complete and exclusive)
* **Compels court** to allow supplemental evidence
* **Presumes partial integration**

**UCC 2-207** - Battle of the Forms

* Material alterations don't become part of contract
* Disclaimer of warranties likely material alteration

**UCC 2-313** - Express Warranties

* Any affirmation of fact or promise by seller to buyer
* Becomes part of basis of bargain
* Creates warranty that goods conform

### Restatement Sections

**Restatement (Second) § 209** - What Constitutes Integration

* Writing not assented to as final expression ≠ integration
* Intent to finalize is determinative

**Restatement (Second) § 216** - Integrated Agreements

* More flexible, less formal approach
* Post-Mitchell v. Lath modern rule

**Restatement § 241B** (First Restatement) - Collateral Agreement Test

* Cited in Masterson v. Sine
* "Such agreement as might naturally be made as separate agreement by parties"
* Considering situation parties were in

***

## XIV. Practice Tips for Lawyers

### A. Drafting Contracts

**Be Specific**:

* Don't use vague terms (like just "Porsche")
* Define all key terms
* Specify quantities, dates, prices exactly
* Malpractice risk if ambiguous

**Include Merger Clause**:

* If want complete integration
* "This constitutes entire agreement"
* Helps prevent parol evidence

**Specify Deadlines**:

* When payment due
* Performance dates
* Time is of the essence (if applicable)

**Settlement Agreements**:

* Better: Settlement is $300K, discounted to $100K if paid by June 1
* NOT: Settlement is $100K, but $300K if don't pay (illegal penalty)
* "Subject to fully executed release and settlement agreement"

### B. Litigation Strategy

**Discovery Preparation**:

* Box opponent in with written discovery
* Use opponent's own answers against them
* Depositions critical for locking in testimony

**Opposing Counsel Relations**:

* Be professional and courteous
* Grant reasonable extensions (builds goodwill)
* Small world - reputation matters
* Being difficult = opponent will be difficult back

**Safe Harbor Rule** (CCP § 128.6):

* Letter demanding correction of false/misleading statements
* Give time to fix
* If don't fix → sanctions, possible State Bar report
* Take very seriously

### C. Ethics

**Trust Account**:

* NEVER bounce trust account check
* Minimum suspension of many months
* Very serious ethical violation

**Commingling Funds**:

* Keep client funds separate
* Extremely serious violation
* Can lead to disbarment

**ChatGPT/AI Warning**:

* Absolute prohibition on exams (students expelled)
* Can use in practice BUT must verify everything
* False citations = State Bar discipline
* Never submit unverified AI work product