The parol evidence rule may be summarized as follows: parol evidence of contract negotiations, or of prior or contemporaneous agreements that contradict or vary the written contract, is not admissible to vary the terms of a contract which is clear and unambiguous. The rule recognizes that in back of nearly every written instrument lies a parol agreement, merged therein. The practical justification for the rule lies in the stability that it gives to written contracts; for otherwise either party might avoid his obligation by testifying that a contemporaneous oral agreement released him from the duties that he had simultaneously assumed in writing. In other words, the parol evidence rule addresses the fact that disappointed parties will have a great incentive to describe circumstances in ways that escape the explicit terms of their contracts.
The organization contracted to use of hotel facilities for a convention. The facilities were sold to the hotel and recreation corporation, which replaced the workforce with non-union employees. The organization sued for breach of contract and fraud based on an independent promise that the hotel would have union employees for the convention. On appeal, the court reversed the summary disposition for the organization. Defendants hotel and recreation corporations appealed an order from the Oakland Circuit Court (Michigan) granting summary disposition to plaintiff union organization on its claims for breach of contract, conversion, and fraud. The hotel and recreation corporations appealed the denial of their motion for summary disposition. The order granting summary disposition was reversed and the case was remanded for a determination of liquidated damages.
Is parol evidence admissible with regard to the threshold question of integration where the written agreement includes an explicit merger or integration clause?
The court declined to follow Van Pembrook, holding that a merger clause was conclusive and parol evidence was not admissible to show that an agreement was not integrated except in cases of fraud that invalidate the integration clause or where an agreement was incomplete on its face and parol evidence was necessary to fill the gaps. As to the fraud claim, the merger clause made it unreasonable for the organization to rely on any representations not in the contract. The trial court also erred in ruling invalid the liquidated damages provision because it was reasonable in relation to the potential injury from cancellation.