§ 7.01 Parol Evidence Rule

The parol evidence rule operates in situations where there is a writing that represents the final embodiment of the contract or some of its terms. The rule governs whether parties may introduce evidence of extrinsic agreements to prove the existence of additional or modified terms.

The parol evidence rule does not bar extrinsic evidence offered for the following purposes:

• to aid in the interpretation of existing terms
• to show that a writing is or is not an integration
• to establish that an integration is complete or partial
• to establish subsequent agreements or modifications between the parties
• to show that terms were the product of illegality, fraud, duress, mistake, lack of consideration or other invalidating cause

[1] Finality of Writing

The more formal and complete a writing is, the more likely it is that it represents the final embodiment of the agreement. Nevertheless, the writing need not be signed or complete in order to be deemed final. Any relevant evidence may be admitted to demonstrate that the writing was not intended to be final.

[2] Writing as Integration

A written document that serves as a final embodiment of the agreement may be either a:

1) complete integration – an expression of the parties' agreement in its entirety; or

2) partial integration – an expression of only a portion of the agreement.

§ 7.02 Complete Integration

If a writing is found to be a complete integration, the parol evidence rule precludes evidence of prior or contemporaneous agreements to contradict or supplement the contract. However, evidence of course of dealing, course of performance or trade usage that supplies a consistent additional term is permitted. [UCC § 2-202(1)]

§ 7.03 Partial Integration

If a writing is found to be a partial integration, the parol evidence rule precludes the following types of extrinsic evidence:

• prior agreements (whether written or oral) that contradict a term in the contract
• contemporaneous oral agreements

Consistent additional terms to a partial integration may be established by evidence of:

• contemporaneous writing(s)
• course of dealing, course of performance or trade usage

[Restatement §§ 214-216; UCC § 2-202]

§ 7.04 Determining Whether a Writing is a Complete or Partial Integration

There are several approaches to determining whether a writing is a complete or partial integration:

1) four corners" or "plain meaning" rule – If the writing appears complete and final on its face, the writing is conclusively presumed to be a complete integration.

2) collateral contract" concept – All final writings are deemed to be partial integrations.

3) reasonable person" approach (from Williston's rules) – If a writing appears to be a complete expression of the parties' agreement, it is a complete integration unless the additional terms are such that it would be natural to enter a separate agreement as to such terms, in which case the writing is a partial integration. This is the majority approach.

4) intention of the parties" approach (Corbin) – This approach allows all relevant evidence on the issue of intent, including evidence of prior negotiations. There is increasing acceptance of this approach, as it has been incorporated into the UCC and the Restatement Second. [See Restatement § 210, comment b; UCC § 2-202]

§ 7.05 Merger Clauses

merger clause establishes that the writing is intended to be the complete expression of the agreement between the parties. Such clauses are generally conclusive on the issue of integration and will be enforced absent proof of fraud, mistake or other defense. A merger clause contained in a contract of adhesion, however, may be given less weight than such clauses in non-adhesion contracts