Parol Evidence Rule

Mitchill v. Lath, p. 387
Ct. of App. N.Y., 1928

Relevant Facts: Plaintiff purchased land from defendant in a written contract. Prior to this written contract, defendant had verbally agreed to remove an unattractive icehouse from across the street as a condition for sale. The written contract did not mention this verbal agreement. When the defendant refused to remove the icehouse, the plaintiff brought suit in equity for specific performance. Special Term and Appellate Division allowed the suit to go forward; defendant appeals.

Oral agreements outside of the written contract must satisfy these conditions, as articulated by Andrews:

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; or put in another way, an inspection of the written contract, read in the light of surrounding circumstances must not indicate that the writing appears "to contain the engagement of the parties, and to define the object and measure the extent of such engagement." Or again, it must not be so clearly connected with the principal transaction as to be part and parcel of it.

At first, I thought that this would be the dissent's position:
But Lehman believes that since the ice house was on a different plot of land than the one in the contract, equitable relief for detriment incurred in reliance on an unenforceable promise may be available.

In fact, this turned out to be the trial court's reasoning, though it granted $8,000 in estimated land value depreciation rather than specific performance. Why didn't it grant specific performance? The most obvious answer would be that removal of the ice house would be more costly than the amount by which its presence caused the Mitchills' land to depreciate. But this seems unlikely; I doubt it would cost $8,000 in 1928 ($100,000 inflation in 2008) to remove a dinky old ice house. More likely, the court preferred to award damages because it is more difficult to oversee specific performance, and it felt compensation damages were less messy than specific performance.

On to bigger questions than idle speculation.

Parol Evidence Rule

This appears to be a principle of contracts that attempts to resolve disputes about what obligations in a contract are enforceable. In particular, the Parol Evidence Rule seeks to limit terms and conditions that were not included in the final executed contract. If a final agreement is signed, the only terms that are enforceable under that agreement are those that appear in the writing. Previous oral negotiations or proposed elements of a final writing are not enforceable in these cases.

Justice Andrews in 1928 describes it as, "a rule of law which defines the limits of the contract to be construed." Even if the parties concede that an oral agreement was made, that oral agreement is still not enforceable if there was a subsequent written agreement that did not include the orally-agreed-upon condition.

Now, the parol evidence rule does not apply if it can be shown that the oral agreement was sufficiently distinct and unrelated to the subsequent written contract. Thus, if I agree orally to sell you my car, and 5 minutes later sign a contract to mow your lawn, neither you nor I can void the oral agreement to sell the car based on the parol evidence rule. The two contracts are unrelated. This is an obvious example, but it would not take much imagination to conjure a situation in which the line between related and unrelated is more blurry.

Let's say that you and I orally agree that I will supply you with lawn ornaments at a reduced price, and five minutes later we sign an agreement that I will mow, fertilize, and maintain the general upkeep of your lawn (no mention of the lawn ornaments). Is the oral agreement to supply lawn ornaments relevant enough to the written contract that it should have been in the contract (such that its absence implies a lack of final agreement), or is it an entirely different matter that stands distinct and unaffected by the written agreement? Drawing the line in this case would depend on how much we view the supply of lawn ornaments to be a part of "the general upkeep" of one's lawn.