Mitchill agreed to buy a farm from Lath on the condition that
an ice house across the street would be removed.
Lath agreed, but that condition was never explicitly put into
the written contract for the sale of the property.
The problem here is that this contract is now
partially-written and partially-oral.This requires the Parol Evidence Rule to work out exactly what is and what isn't in
the contract.
Parol evidence is
when a written contract is modified by an oral agreement.The question is whether this
oral agreement is officially part of the contract, or just part of its
"negotiating history."
Mitchill moved in and made lots of improvements on the land,
but Lath never removed the ice house.Mitchill sued for specific performance.
The Trial Court found for Mitchill.Lath appealed.
The Appellate Court affirmed.Lath appealed to the New York Supreme Court.
The New York Supreme Court reversed and dismissed the claim.
The New York Supreme Court found that an oral agreement to modify a written contract is only
enforceable if all of the following are true:
The oral agreement
must be collateral in form.
The oral agreement
must not contradict any express or implied provisions of the written
contract.
The oral agreement
must not be of the type the parties would ordinarily expect to put into
writing.In other words,
the written agreement on its face mustn't appear to contain the complete
agreement of the parties.
The Court found that Lath's oral promise fails the third part of the test.
The contract says a lot of stuff, but nothing about removing
the ice house.The contract
appears on its face to contain the all the responsibilities of each
side.
Basically, an objective observer would expect that if the
parties really agreed about the ice house that they would have (and
could have) included something about it in the contract.
As a general rule, parol evidence is inadmissible.There is an implicit presumption that parties to a
contract will integrate in the written contract every agreement relating
to the nature or extent of the contract, and that the contract completely
covers the transaction.
In a dissent, the minority agreed with the statement of the
rule, but not its application.In particular, the minority felt that there is solid evidence for
the existence of the oral promise, and that Mitchill reasonably relied on
that promise in deciding to buy the property.
The agreement to remove the ice house was "collateral
to, yet connected with" the main written contract. Since there was no independent
consideration for the problem to remove the ice house. it can only be
enforceable if it's tied to the same consideration as the written
contract.
