Brief Fact Summary. The Mitchells (Plaintiffs) brought an action against the Laths (Defendants) to enforce an oral agreement to remove an icehouse from property purchased from the Defendants. Defendants appealed from judgment granted in favor of Plaintiffs.
Synopsis of Rule of Law. An oral agreement is not collateral to the written agreement if its subject is closely related to the subject of the written agreement.
Before such an agreement as the present is received to vary the written contract at least three conditions must exist, (1) the agreement must in form be a collateral one; (2) it must not contradict express or implied provisions of the written contract; (3) it must be one that parties would not ordinarily be expected to embody in the writing the agreement must not be so clearly connected with the principal transaction as to be part and parcel of it.View Full Point of Law
Issue. Whether the parties’ oral agreement may be enforced?
Held. No. Judgment of the Appellate Division is reversed.
The parol evidence rule defines the limits of the contract to be construed. It applies to attempts to modify a contract by parol. If one agreement is oral and the other is written a problem arises, as is here, whether the bond is sufficiently close to prevent proof of the oral agreement. For an oral agreement to vary the written contract at least three conditions must be met, the agreement must in form be a collateral one, it must not contradict express or implied provisions of the written contract, and it must be one that parties would not ordinarily be expected to embody in the writing.
An oral agreement is not collateral to the written agreement if its subject is closely related to the subject of the written agreement. Here, the agreement to remove the icehouse was such that it would have naturally been included in the written contract for the sale of the farm. The oral agreement contradicts the written agreement. Therefore, the writing was concluded as being a complete integration and cannot be modified.
Dissent. The removal of the icehouse could not be expected to be included in the writing, and therefore the writing is not a complete integration. Therefore, the oral agreement is parol evidence and may be admitted to prove the contents of the written agreement.
Discussion. There are two conflicting views on parol evidence. The first is the Williston or Restatement view, also known as the four corner rule, which states that if a term is not found in the writing, then it cannot be offered into evidence by one of the parties if the court concludes that it would have been natural of the parties to have included it in the writing. Here, the majority adopts this approach. The second view is the Corbin view, which looks at available evidence to determine the actual intention of the parties. The dissent adopts this view.