Lecture Notes: Parole Evidence Rule and Contract Interpretation

Parole Evidence Rule

• Definition: Despite its name, it is NOT a rule of evidence but a rule of substantive contract law.
• Purpose: Favors written contract terms.
  • Enforces the written terms if parties have put their agreement in writing.
• Exclusion: Previous or contemporaneous discussions, negotiations, or agreements (oral or written) can be excluded based on integration.

Integrated Agreement

• Fully Integrated:
  • Entirely based on written contract.
  • No external terms are admitted.
• Partially Integrated:
  • Mix of written and oral terms.
  • Oral terms cannot contradict the main written contract.

Uniform Commercial Code (UCC)

• Section 2-202: Contains similar rules as common law.
  • Generally, UCC and common law yield similar outcomes.
  • UCC might be slightly more flexible.

Merger Clause

• Purpose: Indicates the writing is the entirety of the agreement (fully integrated).
• Issue: Sometimes included when parties do not truly mean it.

Contract Interpretation

• Importance: Crucial in breach of contract lawsuits.
  • Disputes often arise over the meaning of terms, not the existence of the contract.

Common Issues

• Spelling, grammar, and clerical errors.
• Vague contract language.

Four Corners Rule

• Definition: Interpretation is confined to the document itself.
• Exception: Does not apply when the contract is ambiguous.
  • Latent Ambiguity: Hidden or underlying ambiguity.
  • Patent Ambiguity: Obvious and apparent ambiguity.

Notable Case

• Frigaliment Case:
  • Known for its exploration of contract interpretation tools.
  • Important example for understanding contract interpretation.

Study Tips

• Pay attention to the distinction between fully and partially integrated agreements.
• Understand the implications of merger clauses and exceptions to the four corners rule.
• Study the Frigaliment case for practical insights into contract interpretation.