The Parol Evidence Rule

There are few certainties on the MBE. But it's pretty close to certain you'll see one and probably more than one question in Contracts that requires an understanding of the parol evidence rule. Before getting into some of the exceptions, first the rule:

If the parties to a contract express their agreement in writing with the intent that the contract reflect the final expression of their agreement then any other written or oral statement made prior to the contract or contemporaneous with the contract will not be admissible to vary the terms of the contract. This rule does not apply to statements that are made after the contract has been created; those statement should instead be analyzed as contract modifications. Importantly, the rule as stated here applies only when the intent of the parties is that the contract reflect the final expression of their agreement. It's often said that for the rule to apply, the parties must intend that the contract is a final integration of their agreed upon terms.

An integration can be either complete or partial. If an integration is complete, the contract cannot be contradicted or supplemented with oral or written statements made prior to the contract or contemporaneous with it. But if the integration is partial, the contract cannot be contradicted with such statements but it may be supplemented with terms that are consistent with those in the contract. A merger clause is one way to indicate that the integration is intended as complete rather than partial, though a merger clause alone may not entirely answer that question. Another way I've seen this stated is that if the contract it completely integrated then parol evidence will be excluded if it is within the scope of the contract. If it's partially integrated, then the evidence will only be excluded if it contradicts the contract. 

The MBE is often a test of exceptions and there are quite a few here. Even if the parol evidence rule would generally apply to prevent the admissibility of certain statements, those statements may still be admissible if offered to prove that the contract was never formed due to formation defects (fraud, duress, mistake, illegality, etc.). In addition, if a party asserts that the contract was dependent upon an oral condition precedent, evidence of that condition precedent will be admissible even if the contract is deemed completely integrated.

Further, if there is uncertainty or ambiguity in the terms of the contract, evidence that will assist in interpreting those ambiguous terms will not be excluded by the parol evidence rule. And because consideration is such a vital component of a contract, the parol evidence rule will not bar evidence intending to prove that the consideration stated in the contract was not in fact paid.

The Restatement of Contracts provides for another exception worth noting. Sometimes called the "naturally omitted terms doctrine," it provides that evidence of terms that would naturally be omitted from the written agreement may be admissible notwithstanding the parol evidence rule. A term would naturally be omitted if it does not conflict with the contract and if it concerns a subject that similarly situated parties would not ordinarily be expected to include in the contract.

Lastly, there are a few points to note that are specific to the sale of goods. For the most part, Article 2 of the UCC follows the general rule: unless one of the above exceptions applies, parties cannot contradict a completely integrated written contract with prior or contemporaneous oral or written statements but they may supplement a partially integrated contract with the same. Article 2 also provides, though, that a written contract's terms may be explained or supplemented by evidence of course of performance, course of dealing, and usage of trade.