Hatley
signed a handwritten lease to rent a farm from Stafford to grow
wheat.There was a provision
in the contract that Stafford could buy out the lease at the rate of $70
per acre.The contract didn't
say when Stafford could exercise
the buy out option.Hatley
claimed that there had been an additional oral agreement that the buy out
could only be done within the first 30-60 days of the lease.Stafford came onto Hatley's land
and cut down the wheat in preparation for building a mobile home
park.Hatley sued for
trespass.
Hatley
argued that the written lease was only a partial integration of the contract, which included both written
and oral parts.
Stafford
tried to argue that the evidence was inadmissible under the three part
standard established in Mitchill v. Lath (160 N.E. 646 (N.Y. 1928)).
Stafford
argued that the oral agreement was inconsistent with written agreement, and
therefore failed part of the Mitchill test.
The
Trial Court allowed Hatley to introduce evidence of the oral agreement.
The
Trial Court found for Hatley.Stafford appealed on the basis that Hatley shouldn't have been
allowed to use the oral evidence.
The
Appellate Court affirmed.
The
Appellate Court found that the Trial Court was justified in admitting the parol
evidence and that the question of
whether the agreement was made was correctly left to the jury.
The
Court found that a term of the oral agreement must contradict an express
provision of the written agreement in
order to be considered inconsistent with it.
Therefore,
this part of the rule is satisfied because the written agreement doesn't
say anything at all about a buy out.It would have to have a different buyout limitation than the oral agreement for
it to be contradictory.
The
Court found that parol evidence
can only be introduced if:
The
oral agreement was not
inconsistent with the written agreement.
The
oral agreement was collateral in
nature.
The
oral agreement was such that it
might "naturally" be made separately from the written
agreement "by parties situated as were parties to the written
contract."
This ruling was in agreement with most courts that there is a presumption that the writing was
intended to be a complete integration, at least when the writing is
complete on its face, and should admit evidence of consistent additional
terms only if there is substantial evidence that the parties did not
intend the writing to embody the entire agreement.
The
jury found that the fact the wheat at harvest would be worth $400 an
acre, but the contract only provided for a $70 per acre buyout was
evidence that there was more to the contract than what was in the written
contract.
In
addition, the Court found that the fact the written contract was
'unsophisticated', and no lawyers advised either party made it plausible
that there was more to the contract that what was expressed in writing.
Modern
Courts have been more favorable to this decision about introducing parol
evidence, and have been less favorable
to the decision of Mitchill.
Courts
agree that you can always use parol evidence to interpret the words in the contract.If used aggressively, it can be a
tremendous loophole.For
example:
A
law firm makes a detailed written contract with a merger clause
to have modern art put in its lobby.Every 6 months, the painting is changed out.The third month the gallery puts
in a Monet painting.The
law firm says that this is impressionist, and therefore not 'modern
art', so it doesn't meet the terms of the contract.The gallery could say that they
had an oral understanding that 'modern' art was anything made after
1900.Here the oral
agreement can be used to interpret the term 'modern'.
