AN ALTERNATIVE APPROACH TO THE PAROL EVIDENCE RULE: A REJECTION OF THE RESTATEMENT (SECOND) OF CONTRACTS; MITCHILL V. LATH

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1 AN ALTERNATIVE APPROACH TO THE PAROL EVIDENCE RULE: A REJECTION OF THE RESTATEMENT (SECOND) OF CONTRACTS; MITCHILL V. LATH REVISITED FRANK L. SCHIAVO * I. INTRODUCTION As early as 1898, Professor Thayer observed that [f]ew things are darker than [the parol evidence rule], or fuller of subtle difficulties. 1 Professor Wigmore similarly noted, [I]t is not strange that the so-called parol evidence rule is attended with confusion and obscurity which make it the most discouraging subject in the whole field of evidence. 2 Professor Sweet described it as a maze of conflicting tests, subrules, and exceptions, 3 and Professor Murray noted that the rule has been described as a legal concept whose mysteries are familiar to many but fathomed by few. 4 It is not surprising that the rule confuses students, teachers, and scholars. The Restatement (Second) of Contracts does nothing to alleviate the confusion. Its methodology only adds to it. This Article suggests an approach to the parol evidence rule that is simpler, but retains the essence of the rule. Copyright 2013, Frank L. Schiavo. * Associate Professor of Law, Barry University Dwayne O. Andreas School of Law; B.S. 1956, Wharton School, University of Pennsylvania; J.D. 1959, Villanova University School of Law; LL.M. (Taxation) 1965, New York University School of Law. The author teaches in the areas of Contracts; Federal Income Tax; and Wills, Trusts, & Estates. The author is indebted to Susan S. Bendlin and Daniel P. O Gorman for their comments and suggestions on drafts of this Article and to his research assistant, Karen Nolan, who rendered valuable assistance in finalizing this Article. 1 JAMES BRADLEY THAYER, A PRELIMINARY TREATISE ON EVIDENCE AT THE COMMON LAW 390 (Augustus M. Kelley Publishers 1969) (1898). 2 9 JOHN HENRY WIGMORE, EVIDENCE IN TRIALS AT COMMON LAW 2400 (James H. Chadbourn rev., Little, Brown & Co. 1981). 3 Justin Sweet, Contract Making and Parol Evidence: Diagnosis and Treatment of a Sick Rule, 53 CORNELL L. REV. 1036, 1036 (1968). 4 JOHN EDWARD MURRAY, JR., MURRAY ON CONTRACTS 82(B) (LexisNexis, 4th ed. 2001).

2 760 CAPITAL UNIVERSITY LAW REVIEW [41:759 II. THE RULE The Restatement (Second) of Contracts describes the parol evidence rule as a binding integrated agreement [that] discharges prior agreements to the extent that it is inconsistent with them or to the extent that they are within its scope. 5 The rule is designed to prevent adding terms to a written agreement that the parties may have agreed to prior to or contemporaneously with the written agreement, but that were omitted from the final written agreement. 6 The rule only applies if the second agreement is written, regardless of whether the first agreement is oral or written. 7 It must be understood that the parol evidence rule is not applicable until the written agreement is enforceable. 8 Thus, any evidence would be admissible to show the agreement is unenforceable due to fraud, mistake, illegality, or accident. 9 Furthermore, if none of the terms in the writing are final (e.g., a letter of intent or preliminary memorandum), the parol evidence rule is not applicable because such a writing is not enforceable. 10 The parol evidence rule serves two separate functions and answers the question of why the evidence was offered: (1) the first function is determining what terms are part of the contract, i.e., what is the content of the written agreement? 11 ; (2) the second is determining what those terms mean, i.e., it has a role in interpretation. 12 Professor Margaret N. Kniffen compares these two functions to an Emperor and Empress, each clothed in different requirements : Contract interpretation, which can be labeled the Empress, functions to assign meaning to terms already contained within a contract. In contrast, the parol evidence rule, which can be designated the Emperor, determines whether 5 RESTATEMENT (SECOND) OF CONTRACTS 213(1) (2) (1981). 6 MURRAY, supra note 4, 82(B). 7 Id. 82(A) ( Where the second agreement is evidenced by a writing, the parol evidence process may become operative whether the prior agreement was oral or written. ). 8 See JOSEPH M. PERILLO, CALAMARI AND PERILLO ON CONTRACTS 3.2 (6th ed. 2009). 9 Arthur L. Corbin, The Parol Evidence Rule, 53 YALE L.J. 603, (1944). 10 See id. at PERILLO, supra note 8. This leads to two questions: [W]hether (1) the writing is [an] integration, and (2) if so, whether it is a total or only a partial integration. Id. See also RESTATEMENT (SECOND) OF CONTRACTS 210(1) (2) (1981). 12 See PERILLO, supra note 8.

3 2013] THE PAROL EVIDENCE RULE 761 a term can be added to (or in rare cases, deleted from or displace terms in) a contract. 13 This Article discusses the Emperor concept determining what terms are part of the contract. Although reading a written agreement may seem to be an easy method of determining which terms are part of a contract, that is not enough. For instance, there may be evidence of terms that have been agreed upon, but which have been omitted from the written agreement. Further, an agreement may consist of more than one document. 14 III. DETERMINING OMITTED TERMS How does a court determine whether omitted terms are part of a contract? The classic case on the issue is Mitchill v. Lath. 15 In that case, Catherine Mitchill alleged that before entering a written contract for the sale of the Lath s farm, the parties orally agreed that the Laths would remove an icehouse they owned across the road on land they did not own. 16 No separate consideration passed for this oral promise. 17 Relying on the promise, Mitchill entered a written contract to buy the farm, 18 but the Laths subsequently refused to remove the icehouse. 19 Mitchill sued for specific performance. 20 Although both the trial and appellate divisions ruled in favor of Mitchill, 21 the state high court reversed the decisions on appeal. 22 Writing for the majority, Judge Andrews noted the requirement of at least three 13 Margaret N. Kniffin, Conflating and Confusing Contract Interpretation and the Parol Evidence Rule: Is the Emperor Wearing Someone Else s Clothes?, 62 RUTGERS L. REV. 75, 77 (2009). 14 For example, a seller who will also rent the premises to a buyer of his business would want an agreement for the sale of the business and a separate agreement for the lease. In the event that the seller/landlord would have to foreclose on the lease for the buyer/tenant s failure to pay rent, there would be no need (nor would the landlord want) to submit the purchase agreement into evidence. Only submission of the lease would be required N.E. 646 (N.Y. 1928). 16 Id. at See id. 18 Id. 19 Id. 20 See id. ( The question before us is whether their oral agreement may be enforced in a court of equity. ). 21 Id. at Id.

4 762 CAPITAL UNIVERSITY LAW REVIEW [41:759 conditions before a prior oral agreement may alter a written contract: (1) The [oral] agreement must in form be a collateral one, meaning it is distinct from and independent of the written agreement; (2) it must not contradict express or implied provisions of the written contract; [and] (3) it must be one that parties would not ordinarily be expected to embody in the writing, meaning it must not be so clearly connected with the principal transaction as to be part and parcel of it. 23 The court determined that the third condition was not met; 24 it found that the contract was a full and complete written agreement. 25 If an agreement were made regarding the icehouse, it would be most natural that it would be found in the written agreement because it was so closely connected with the subject matter of the written agreement. 26 Because it was not in the written agreement, it could not be proved. 27 Judge Lehman agreed that the contract for the sale of the land was complete. 28 However, he believed that the oral agreement should have been admitted because the land contract was not intended to embody negotiations or agreements, if any, in regard to a matter so loosely bound to the conveyance as the removal of an icehouse from land not conveyed. 29 In other words, Judge Lehman thought that the contract met the third condition. A. Broad Questions The Restatement (Second) of Contracts suggests an approach that analyzes the issues with a series of logical questions, narrowing the issues from broad to narrow. 30 The first broad question is whether the contract is 23 Id. 24 Id. 25 Id. 26 Id. 27 See id. Additionally, the majority, disagreeing with other cases that seemed to state the contrary, noted that the fixed form of a deed makes it inappropriate to insert collateral agreements, however closely connected with the sale. Id. 28 Id. (Lehman, J., dissenting). 29 Id. at (Lehman, J., dissenting). Judge Lehman could not find an intention to cover a field so broad as to include prior agreements, if any such were made, to do other acts on other property after the stipulated conveyance was made. Id. at 650 (Lehman, J., dissenting). 30 See RESTATEMENT (SECOND) OF CONTRACTS (1981).

5 2013] THE PAROL EVIDENCE RULE 763 integrated, and the next question is whether the integration is complete or partial Is the Contract Integrated? To determine whether a contract is integrated, a court should ask the following question: Does the agreement contain one or more terms that the parties consider final? 32 If so, the contract is considered integrated 33 even though the writing may not contain all of the terms of the parties agreement. Thus, the question is whether the agreement is final as to the terms that it actually contains. 34 According to the Restatement (Second) of Contracts, a contract is integrated if the agreement constitutes a final expression of one or more terms of an agreement. 35 This is a question to be determined by the court. 36 Where there is a written agreement, it will be considered integrated if in view of its completeness and specificity [it] reasonably appears to be a complete agreement. 37 If the court finds the contract is not integrated, then the parol evidence rule does not apply, and evidence of any prior agreement, consistent or not, is admissible. 38 In this instance, the fact finder must determine what terms are part of the agreement. How does the court decide this first question? Initially, any relevant evidence is admissible to show that the writing was not intended to be final. 39 Although this is a question of fact, it is for the trial judge to determine. 40 In determining whether the contract is a final, integrated writing, [t]he crucial requirement is that the parties have regarded the writing as the final embodiment of their agreement. 41 The court must therefore determine the intent of the parties: 31 Id. 32 Id. 209(1). 33 See id. 34 Id. Where an agreement is reduced to a writing that appears to be complete, it is taken to be integrated. Id. 209(3). 35 Id. 209(1). 36 Id. 209(2). 37 Id. 209(3). 38 E. ALLAN FARNSWORTH, CONTRACTS 7.3 (4th ed. 2004). 39 PERILLO, supra note 8, Id. 41 Id.

6 764 CAPITAL UNIVERSITY LAW REVIEW [41:759 The parol evidence rule is best understood in light of its purpose: to give legal effect to whatever intention the parties may have had to make their writing at least a final and perhaps also a complete expression of their agreement. If the parties had such an intention, the agreement is said to be integrated, and the parol evidence rule bars evidence of prior negotiations for at least some purposes. 42 The focus plainly is on the intention of the parties, not the integration practices of reasonable persons acting normally and naturally Is the Contract Completely or Partially Integrated? If the court finds the agreement is integrated, its inquiry must go further into whether the integration is partial or complete. 44 A completely integrated agreement is one that the parties adopt not only as final, but also as complete and exclusive. 45 If the agreement is not completely integrated, it is considered partially integrated. 46 Courts have adopted different tests to answer the question of whether a contract is completely or partially integrated. 47 In many of these approaches, intent is not the basis of the decision. 48 The answer to this second question is crucial to the final issue of whether the offered term is consistent or inconsistent with the agreement. If inconsistent, the offered term may only be admitted if the agreement is not integrated. 49 If the offered term is consistent, it may only be admitted where the agreement is partially integrated. 50 B. The Four Corners Rule Under the four corners rule, the trial judge determines whether a writing is a total integration by examining only the instrument itself. 51 If 42 FARNSWORTH, supra note See Interform Co. v. Mitchell, 575 F.2d 1270, 1278 (9th Cir. 1978) ( [T]he intent of the parties must be derived from all the documents employed, the circumstances surrounding their execution, and the subsequent conduct of the parties. ). 44 RESTATEMENT (SECOND) OF CONTRACTS 210 (1981). 45 Id. 210(1). 46 Id. 210(2). 47 PERILLO, supra note 8, Id. 49 RESTATEMENT (SECOND) OF CONTRACTS 215 cmt. a. 50 Id. 216(1). 51 PERILLO, supra note 8, 3.4(a).

7 2013] THE PAROL EVIDENCE RULE 765 the agreement appears complete on its face... the instrument is conclusively presumed to be completely integrated. 52 Professor Murray refers to this as the appearance test. 53 The first step is for the judge to examine the writing. 54 If the judge finds that a writing is complete based on appearance alone, then the writing is the sole criterion of its own completeness. 55 Although this approach is in decline, it still has much vitality. 56 Conversely, Professor Wigmore suggests that this is an untenable task. 57 Whether the writing was meant to be complete cannot be determined until compared with what is not in the agreement, the extrinsic matter. The Restatement (Second) of Contracts suggests that the appearance test only provides a rebuttable presumption of completeness, 58 which reflects Wigmore s analysis. C. The Natural Inclusion Test It must be remembered that another test, the natural inclusion test, was used to decide Mitchill v. Lath. 59 This test asks whether it would be natural not to include the term in the written contract. 60 Professor Williston believes that, absent a merger clause, one must consider additional consistent terms if the instrument is obviously incomplete. 61 If it would appear complete to a reasonable person, it is deemed a complete integration; but the term would be admissible if the parties would naturally enter a separate agreement as to the term. 62 Once the court admits the term into evidence, the jury must decide whether the term was part of the written agreement Id. 53 See MURRAY, supra note 4, 84(C)(1). 54 Id. 55 Id. 56 PERILLO, supra note 8, 3.4(a) (citing Indep. Energy Corp. v. Trigen Energy Corp., 944 F. Supp. 1184, 1196 (S.D.N.Y 1996); Air Safety, Inc. v. Teachers Realty Corp., 706 N.E.2d 882, (Ill. 1999)). 57 WIGMORE, supra note 2, 2431(b). 58 RESTATEMENT (SECOND) OF CONTRACTS 209(3) (1981). 59 See 160 N.E. 646, 647 (N.Y. 1928). 60 Id. 61 See 11 SAMUEL WILLISTON, A TREATISE ON THE LAW OF CONTRACTS 33:21 23 (Richard A. Lord ed., 4th ed. 2012). See also PERILLO, supra note 8, 3.4(c). 62 PERILLO, supra note 8, 3.4(c); WILLISTON, supra note 61, PERILLO, supra note 8, 3.2(c).

8 766 CAPITAL UNIVERSITY LAW REVIEW [41:759 The Restatement (Second) of Contracts contains Williston s natural inclusion test, which was also formulated in Mitchill. 64 Williston was concerned with whether reasonable parties... would naturally or obviously or normally include such coverage in the writing. 65 This is the final test the majority applied in the Mitchill case. The court said, Were such an [oral] agreement [for the removal of the icehouse] made it would seem most natural that the inquirer should find it in the contract. 66 In his dissent, Judge Lehman believed the contrary; a deed was not the place for an agreement to remove the icehouse, and thus it would not be natural to find the provision in the contract. 67 D. All Relevant Evidence Professor Corbin s approach involves determining the actual intent of the parties and allowing all relevant evidence, even prior negotiations, to show a total integration. 68 The Restatement (Second) of Contracts embodies Corbin s view that any relevant evidence may be provided to show the writing was or was not completely integrated. 69 But a writing cannot of itself prove its own completeness, and wide latitude must be allowed for inquiry into circumstances bearing on the intention of the parties. 70 Recall the basic notion of the parol evidence rule: [A] writing intended by the parties to be a final embodiment of their agreement should be protected from certain kinds of evidence. A writing that is final integrates the terms embodied in it. When it is final and complete it is a total integration. A writing that is final, but that does N.E. at 647; RESTATEMENT (SECOND) OF CONTRACTS 216(2)(b) (1981). 65 WILLISTON, supra note 61, See also MURRAY, supra note 4, 84(C)(4)(b) (embodying the idea that if the parties in Mitchill would have naturally included the prior oral agreement in the writing and did not, the matter is omitted; if they would not have, the matter can be the subject of a collateral agreement and the evidence would be admitted). 66 Mitchill, 160 N.E. at Id. at (Lehman, J., dissenting). 68 PERILLO, supra note 8, 3.4(d). 69 RESTATEMENT (SECOND) OF CONTRACTS 210 cmt. b. 70 Id.

9 2013] THE PAROL EVIDENCE RULE 767 not completely express the parties contract, is a partial integration. 71 E. Collateral Agreement Test The parol evidence rule does not prohibit evidence of a collateral agreement, an agreement separate and apart from the agreement at issue. 72 As the court stated in Mitchill, [The parol evidence rule] does not affect a parol collateral contract distinct from and independent of the written agreement. 73 However, there are two caveats to its admission. 74 The first is that the oral agreement cannot contradict the main agreement. 75 The second is that the agreement cannot be one typically expected to be embodied in writing. 76 F. Merger Clauses May the parties themselves avoid the issue by stating in the agreement that it is final and complete? The purpose of this clause would be to merge all prior negotiations into the written agreement. Williston believes that the presence of a merger clause presumptively establishes that the integration is total. 77 The Restatement (Second) of Contracts supports this assertion, but explains that such a declaration may not be conclusive. 78 The intent of the parties may be manifested without such a clause. 79 Various courts have addressed merger clauses. The district court in Smith v. Central Soya of Athens, Inc. 80 stated the following: 71 PERILLO, supra note 8, 3.2. See also 3 ARTHUR LINTON CORBIN, CORBIN ON CONTRACTS: A COMPREHENSIVE TREATISE ON THE RULES OF CONTRACT LAW 573 (West 1960). 72 MURRAY, supra note 4, 84(C)(4)(b). Professor Murray notes that this provides no analytical basis for a court to decide the question of admissibility.... [The collateral agreement test] is a conclusory label attached after the critical test has already been applied and the court has already determined whether the evidence should be admitted. Id. 73 Mitchill v. Lath, 160 N.E. 646, 647 (N.Y. 1928). 74 Id. 75 Id.; FARNSWORTH, supra note 38; PERILLO, supra note 8, 3.4(b). 76 See supra Part III.C (the natural inclusion test). 77 PERILLO, supra note 8, 3.4(c). 78 RESTATEMENT (SECOND) OF CONTRACTS 209 cmt. b (1981). 79 Id F. Supp. 518 (E.D.N.C. 1985).

10 768 CAPITAL UNIVERSITY LAW REVIEW [41:759 [A merger clause] creates a rebuttable presumption that the writing is a complete and exclusive statement of the contract terms. In order to rebut the presumption and, in effect, invalidate the merger clause, a party must offer evidence to establish the existence of fraud, bad faith, unconscionability, negligent omission or mistake of fact. 81 In Colafrancesco v. Crown Pontiac GMC, Inc., 82 Joy Colafrancesco purchased a 1981 Datsun 310 believing she had purchased a 1982 model. 83 All paperwork indicated that it was a 1981 model. 84 The court excluded parol evidence of her prior oral understanding. 85 The contract for sale included a merger clause that stated, The above comprises the entire agreement pertaining to this purchase and no other agreement of any kind, verbal understanding or promise whatsoever, will be recognized. 86 The Alabama Supreme Court held that the parol evidence was not admissible. 87 The court also found that the plaintiff failed to present even a scintilla of evidence of fraud or evidence of the conceal[ment] [of] the contents of the contract. 88 In Bird Lakes Development Corp. v. Meruelo, 89 Meruelo purchased a thirty-five acre parcel of land, relying on oral representations of the seller s vice president and broker that the property had sewer lines to the site. 90 The purchase contract for the parcel included a merger clause. 91 After discovering that the property did not have a connection to the sewer line, the Merulo sued for specific performance and damages. 92 In discussing the applicability of the merger clause, the court described two schools of thought. 93 The minority view is that the merger clause conclusively establishes that the integration is total unless the document is obviously incomplete or the merger clause was included as a result of fraud or 81 Id. at So. 2d 1131 (Ala. 1986). 83 Id. at Id. 85 Id. at Id. at Id. 88 Id So. 2d 234 (Fla. Dist. Ct. App. 1993). 90 Id. at Id. at Id. 93 Id. at 238.

11 2013] THE PAROL EVIDENCE RULE 769 mistake. 94 The other view is that finality can never be determined by the words of the contract alone ; thus, all relevant evidence is admissible to show the intent of the parties. 95 The oral agreement would not have been excluded under either view in light of [a finding] that execution of the contract was induced by [the seller s] fraud. 96 The appellate court in Zinn v. Walker 97 recognized another method of rebutting the presumption that the written agreement contains the parties final agreement. 98 A real estate developer provided front money to a real estate broker to purchase real estate. 99 Contemporaneously with executing the contract of sale, the parties executed a Resale Profits Agreement. 100 The Resale Profits Agreement provided that net sale proceeds of lots would be shared, with 80% going to the real estate broker and 20% going to the real estate developer. 101 The developer sued to recover her share of the profits from a sale, 102 and the appellate court held that the [c]ontemporaneously signed writings may be incorporated together to divine the meaning and purpose of the contractual whole. 103 The court explained that [w]here giving effect to the merger clause would frustrate and distort the parties true intentions and understanding regarding the contract, the clause will not be enforced. 104 IV. THE FINAL ISSUE The final issue to consider is whether the term is consistent or inconsistent with the agreement. This is the most difficult question because there is no rule of interpretation for how to determine whether the term is consistent. 105 Factors have included whether the term: (1) contradicts an express term of the agreement; 106 (2) in the circumstances 94 Id. (citing Mitchill v. Lath, 160 N.E. 646 (N.Y. 1928)). 95 Id. 96 Id S.E.2d 314 (N.C. Ct. App. 1987). 98 Id. at Id. at Id. 101 Id. 102 Id. at Id. at 318 (citing Yates v. Brown, 170 S.E.2d 477 (N.C. 1969)). 104 Id. 105 PERILLO, supra note 8, RESTATEMENT (SECOND) OF CONTRACTS 215 (1981). To put this factor another way: Is the term within the scope of the written agreement?

12 770 CAPITAL UNIVERSITY LAW REVIEW [41:759 might naturally be omitted from the writing; 107 or (3) was agreed to for separate consideration. 108 The flow chart in Appendix Figure 1 and the diagram in Appendix Figure 2 illustrate the traditional approach. The diagram shows that when the agreement is not integrated, both consistent and inconsistent terms may be admitted. Likewise, it is clear that when the agreement is completely integrated, neither consistent nor inconsistent terms may be admitted. The troubling area is where the agreement is partially integrated the shaded area. 109 It is in this region that it is unclear whether consistent terms may be admitted. Therefore, the first area of inquiry should be the troubling shaded area where consistent terms overlap the partially integrated agreement. 110 The approach would be to consider whether the proposed term is contradictory with the agreement. 111 Only where it is not contradictory should additional analysis be necessary. Therefore, if the term is contradictory, several other issues are avoided. V. ALTERNATIVE APPROACH It appears that this alternative approach would arrive at the crucial question earlier than that suggested by the Restatement, so why not begin with the question of whether the proffered term is contradictory with the written agreement? Figure 3 illustrates this more direct approach. The court in Sunset Pointe at Silver Lakes Associates, Ltd. v. Vargas 112 appears to have adopted this approach. The buyers entered a contract to purchase a home to be constructed by the seller. 113 The contract was subject to the buyers obtaining a mortgage. 114 The agreement also provided that upon the buyers credit being approved, the sale was to be consummated, regardless of whether the home they currently owned was 107 RESTATEMENT (SECOND) OF CONTRACTS 216(2)(b). 108 Id. 216(2)(a). 109 See infra Appendix Figure See infra Appendix Figure Because section 211 of the Restatement (Second) of Contracts presumes that a standardized agreement is at least integrated, there is no need to address that question first, and the inquiry can be directed to consistency. Otherwise, the court must make a determination as to integration before applying the parol evidence rule. RESTATEMENT (SECOND) OF CONTRACTS 210(3) So. 2d 12 (Fla. Dist. Ct. App. 2004). 113 Id. at Id.

13 2013] THE PAROL EVIDENCE RULE 771 sold or leased. 115 The buyers were approved for a loan, but only upon the contingency that they netted $96,000 from the sale of their current home. 116 However, they did not want to sell that home because other family members lived there. 117 The buyers sued to recover their deposit, alleging that the salesman, who had referred them to the lender, orally promised them that they would be approved for financing without having to sell their home. 118 The buyers argued that parol evidence [was] admissible to establish a contemporaneous oral agreement which induces the execution of a written contract. 119 Without discussing integration, the court held that the parol evidence rule does not permit oral evidence which directly contradicts the written agreement. 120 The diagram of the parol evidence rule in Figure 2 suggests another approach. Specifically, when a court determines that the term does not contradict the written agreement, the question becomes whether the term is admissible. To determine if the term is admissible, the court would inquire whether the term should be naturally included in the written agreement, whether the term was within the scope of the written agreement, and whether there was a collateral agreement with respect to the term. For the evidence to be admitted, the answers to all three of these questions must be yes. The flowchart in Figure 4 illustrates this simpler approach. In this construct, the issue of integration is not even considered. If the term is admitted, then the agreement is partially integrated, and if the term is not admitted, then the agreement is completely integrated. This conclusion is drawn after determining whether to admit the evidence of the term. This approach is consistent with Professor Murray s opinion of collateral agreements. 121 VI. CONCLUSION It can now be seen that the Restatement approach to the parol evidence rule is needlessly complex. It begins with conclusions regarding integration (non-integrated, partial integration, complete integration) and backs into the real issue whether the term can be added to the written 115 Id. 116 Id. 117 Id. 118 Id. 119 Id. 120 Id. at See MURRAY, supra note 4, 84(C)(4)(b).

14 772 CAPITAL UNIVERSITY LAW REVIEW [41:759 agreement. 122 Instead, the first question should be whether the proposed term contradicts the written agreement. This approach is similar to the one used by the court in Mitchill v. Lath. The court did not directly decide whether the term contradicted the agreement. 123 However, writing for the majority, Judge Andrews did so indirectly because he went straight to the three issues presented in Figure 4. He also made brief mention of the collateral agreement condition. 124 The remainder of the court s opinion contemplated whether the term would be one the parties would expect to find in a separate agreement, noting that it must not be so clearly connected with the principal transaction as to be part and parcel of it. 125 Because the term was so closely related to the subject matter of the written agreement, the term was one the parties would expect to be contained in the written agreement, and it could not be proved with parol evidence. 126 The Mitchill court did not decide the contradictory question because it was not necessary. As illustrated in Figure 4, once a court gets past the contradictory issue, three questions arise: (1) Is the term naturally excluded?; (2) is the term outside of the scope of the agreement?; and (3) is the agreement a collateral one? If the answer to any one question is yes, there is still a possibility that the term may be admitted. The answer to all three questions must be yes for the term to be admitted. In the Mitchill case, the answer to the natural exclusion question was no, so the term was not admitted. 127 Therefore, the more logical method of determining whether a term may be omitted under the parol evidence rule is to begin by asking whether the term contradicts the terms of the written contract. This approach avoids 122 See FARNSWORTH, supra note 38 ( The legal effect of a determination that the agreement is integrated, according to the Restatement Second, is that evidence of prior or contemporaneous agreements or negotiations is not admissible to contradict a term of the writing. (quoting RESTATEMENT (SECOND) OF CONTRACTS 215 (1981))); Mitchill v. Lath, 160 N.E. 646 (N.Y. 1928) (supporting the statement that integration is not the real issue in parol evidence litigation because the term integration does not appear anywhere in the court s opinion). 123 See Mitchill, 160 N.E. at 647 (addressing the three conditions that must exist for admissibility and noting that the respondent failed to satisfy the third). 124 Id. ( Collateral in form it is found to be. ). 125 Id. 126 Id. 127 See id.

15 2013] THE PAROL EVIDENCE RULE 773 the convoluted issue of integration, 128 and the parol evidence issue becomes less attended with confusion and obscurity which make it the most discouraging subject in the whole field of evidence See generally id. The absence of the term integration in Judge Andrews s opinion reinforces the thought that the term integration (whether partial or complete) is merely a conclusion made after the term is determined to be admitted or not. 129 WIGMORE, supra note 2.

16 774 CAPITAL UNIVERSITY LAW REVIEW [41:759 VII. APPENDIX The traditional approach can be demonstrated by the following flow chart

17 2013] THE PAROL EVIDENCE RULE 775 The traditional approach may also be illustrated by the following diagram:

18 776 CAPITAL UNIVERSITY LAW REVIEW [41:759 The more direct approach may be illustrated by turning around the first question:

19 2013] THE PAROL EVIDENCE RULE 777 This can be demonstrated by the following flow chart: