Citation. 552 F.2d 447 (2d Cir. 1977)
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Brief Fact Summary.
A corporation in the liquor business agreed to purchase the assets of one of its distributors. The agreement was consummated, but the writing memorializing it, left out a portion of the agreement.
Synopsis of Rule of Law.
Evidence of a contemporaneous oral agreement is admissible under the parol evidence rule if it does not contradict terms of the parties' written agreement.
The Plaintiffs, Harold S. Lee (now deceased) and his two sons Eric Lee and Lester Lee (the "Plaintiffs"), were the 50% owners of Capital City Liquor Company, Inc. ("Capital City"), a wholesale liquor distributorship. Capital City sold a large amount of the Defendant, Joseph E. Seagram & Sons, Inc's. (the "Defendant") products. In May of 1970, Harold Lee discussed the potential sale of Capital City's assets with an Executive Vice President of the Defendant corporation. Harold Lee had a relationship with the Defendant corporation and its principles for many years. Harold Lee agreed to sell his and his sons 50% interest in Capital City to the Defendant, if the Defendant agreed to relocate Harold Lee and his sons "in a new distributorship of their own in a different city." The agreement to purchase Capital City's assets was consummated on September 30, 1970, but the relocation portion of the agreement was never put into writing. The Plaintiffs sued for damages because although the Defendant had opportunities to do so, it never relocated the Plaintiffs. The district court judge allowed the oral relocation agreement to be admitted under the parol evidence rule.
"[W]hether the oral promise to the plaintiffs, as individuals, would be an expectable term of the contract for the sale of assets by a corporation in which plaintiffs have only a 50% interest, considering as well the history of their relationship to [the Defendant"[?]
The court first observed that the district court recognized "the cardinal issue [was] whether the parties 'intended' the written agreement for the sale of assets to be the complete and accurate integration of all the mutual promises of the parties. If the written contract was not a complete integration, the [district] court held, then the parol evidence rule has no application." The court then observed the parol evidence rule does not apply to certain contemporaneously made oral collateral agreements. This is the case "because [if] they are separate, independent, and complete contracts, although relating to the same subject. . . . [t]hey are allowed to be proved by parol, because they were made by parol, and no part thereof committed to writing." Additionally, "the overarching question is whether, in the context of the particular setting, the oral agreement was one which the parties would ordinarily be expected to embody in the writing."
• The court observes several reasons why the oral agreement to provide the Plaintiffs with a new distributorship would not be embodied in the written agreement. First, the fact that the transaction involved a sale of corporate assets and the distributorship agreement was a collateral agreement surviving the closing of the deal. Second, the Defendant's Executive Vice President and Harold Lee had a "close relationship of confidence and friendship over many years." The court felt that due to this relationship, a handshake would have been sufficient to seal the deal. Third and finally, there is no integration clause in the written agreement.
• The court also does not see any contradiction between the oral agreement and the terms of the sales agreement. The written agreement concerned the sale of Capital City's corporate assets and the oral agreement, the relocation of the Plaintiffs.
This case offers an interesting discussion about the parol evidence rule.