CONTRACT LAW RESTATEMENT (SECOND) OF CONTRACTS
LexInter | September 17, 2019 | 0 Comments

Contract Law Restatement (Second) Of Contracts

§213. EFFECT OF INTEGRATED AGREEMENT ON PRIOR AGREEMENTS (PAROL EVIDENCE RULE)

(1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them.

(2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope.

Comments:

a. Parol evidence rule. This Section states what is commonly known as the parol evidence rule…. It renders inoperative prior written agreements as well as prior oral agreements. Where writings relating to the same subject matter are assented to as parts of one transaction, both form part of the integrated agreement. Where an agreement is partly oral and partly written, the writing is at most a partially integrated agreement. See §209.

b. Inconsistent termsWhether a binding agreement is completely integrated or partially integrated, it supersedes inconsistent terms of prior agreements. To apply this rule, the court must make preliminary determinations that there is an integrated agreement and that it is inconsistent with the term in question. See §209. Those determinations are made in accordance with all relevant evidence, and require interpretation both of the integrated agreement and of the prior agreement. 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. See §§212, 214.

c. Scope of a completely integrated agreement. Where the parties have adopted a writing as a complete and exclusive statement of the terms of the agreement, even consistent additional terms are superseded. See §216. But there may still be a separate agreement between the same parties which is not affected. To apply the rule of Subsection (2) the court in addition to determining that there is an integrated agreement and that it is completely integrated, must determine that the asserted prior agreement is within the scope of the integrated agreement. Those determinations are made in accordance with all relevant evidence….

§215. CONTRADICTION OF INTEGRATED TERMS

Except as stated in the preceding Section, where there is a binding agreement, either completely or partially integrated, evidence of prior or contemporaneous agreements or negotiations is not admissible in evidence to contradict a term of the writing.

Comments:

b. Interpretation and contradiction. An earlier agreement may help the interpretation of a later one, but it may not contradict a binding later integrated agreement. Whether there is contradiction depends, as is stated in §213, on whether the two are consistent or inconsistent. This is a question which often cannot be determined from the face of the writing; the writing must first be applied to its subject matter and placed in context. The question is then decided by the court as part of a question of interpretation. Where reasonable people could differ as to the credibility of the evidence offered and the evidence if believed could lead a reasonable person to interpret the writing as claimed by the proponent of the evidence, the question of credibility and the choice among reasonable inferences should be treated as questions of fact.

§216. CONSISTENT ADDITIONAL TERMS

(1) Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated.

(2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is (a) agreed to for separate consideration, or

(b) such a term as in the circumstances might naturally be omitted from the writing.

Comments:

b. Consistency. Terms of prior agreements are superseded to the extent that they are inconsistent with an integrated agreement, and evidence of them is not admissible to contradict a term of the integration. See §§213,215. The determination whether an alleged additional term is consistent or inconsistent with the integrated agreement requires interpretation of the writing in the light of all the circumstances, including the evidence of the additional term. For this purpose, the meaning of the writing includes not only the terms explicitly stated but also those fairly implied as part of the bargain of the parties in fact….

c. Separate consideration. Where there is a binding completely integrated agreement, even consistent additional terms are superseded if they are within the scope of the agreement. See § 213. A separate contract, not covered by the integrated agreement, is not superseded. The rule of Subsection (2)(a) goes further; it limits the scope of the integrated agreement by excluding a consistent additional term made for separate consideration even though the additional term and its consideration are part of the same contract. This rule may be regarded as a particular application of the rule of Subsection (2)(b).

d. Terms omitted naturally. If it is claimed that a consistent additional term was omitted from an integrated agreement and the omission seems natural in the circumstances, it is not necessary to consider further the questions whether the agreement is completely integrated and whether the omitted term is within its scope, although factual questions may remain. This situation is especially likely to arise when the writing is in a standardized form which does not lend itself to the insertion of additional terms. Thus agreements collateral to a negotiable instrument if written on the instrument might destroy its negotiability or otherwise make it less acceptable to third parties; the instrument may not have space for the additional term. Leases and conveyances are also often in a standard form which leads naturally to the omission of terms which are not  standard….Even though the omission does not seem natural, evidence of the consistent additional terms is admissible unless the court finds that the writing was intended as a complete and exclusive statement of the terms of the agreement.

Illustrations:

4. A owes B $1,000. They agree orally that A will sell B Blackacre for $3,000 and that the $1,000 will be credited against the price, and then sign a written agreement, complete on its face, which does not mention the $1,000 debt or the credit. The written agreement is not completely integrated, and the oral agreement for a credit is admissible in evidence to supplement the written agreement.

5. A and B sign a written agreement, complete on its face, that A will sell B Blackacre for $3,000, conveyance and payment to be made within 60 days. It is claimed that B was about to render services for A and that the written agreement was signed on the oral understanding that B would be permitted to pay the price by rendering the services at $50 an hour. The oral understanding is admissible in evidence unless it is found that the written agreement was completely integrated.

e. Written term excluding oral terms (“merger” clause). Written agreements often contain clauses stating that there are no representations, promises or agreements between the parties except those found in the writing. Such a clause may negate the apparent authority of an agent to vary orally the written terms, and if agreed to is likely to conclude the issue whether the agreement is completely integrated. Consistent additional terms may then be excluded even though their omission would have been natural in the absence of such a clause. But such a clause does not control the question whether the writing was assented to as an integrated agreement, the scope of the writing if completely integrated, or the interpretation of the written terms.

Leave a Comment

Your email address will not be published.


CAPTCHA Image
Reload Image