Today we will examine a leading case on the Parol Evidence Rule, Alaska northern development versus Alyeska Pipeline Services. Suppose you sign a written contract, but at the time of signing you'd agreed to additional terms orally. Are the additional oral agreement terms enforceable? The Parol Evidence Rule determines when parties to a written contract can present extrinsic evidence to clarify or add to terms in the written contract. The Parol Evidence Rule is related to our earlier discussion of the Statute of Frauds. The Statute of Frauds determines when non Four Corners evidence, extrinsic evidence can establish the existence of the contract. While the Parol Evidence Rule determines when non Four Corners evidence can establish the terms of a contract. Both rules can be seen as attempts at deterring parties from falsely alleging that a duty is owed. The Statute of Frauds makes it harder for someone to falsely claim that she had an oral agreement with someone else. The Parol Evidence Rule makes it harder for someone to falsely claim that an actual agreement includes additional terms that were never agreed to. But both rules can perversely increase the amount of fraud by making it easier for someone to falsely deny the existence of actual promises. Here the Parol Evidence Rule can make it easier for someone who actually agreed in an ancillary oral agreement to take on additional responsibilities to falsely deny that she ever promised to do so. The Parol Evidence Rule is a substantive rule and contract cases. The word Parol literally means word and Parol Evidence refers to evidence outside the four corners of the written agreement. The Parol Evidence Rule is a common law rule that is also codified in the UCC Section 2-202. Broadly speaking the rule states that where the parties to a contract intended for their written agreement to be the full and final expression of their bargain other written or oral agreements that were made prior to or simultaneous with the writing are inadmissible for the purpose of changing the terms of the written agreement. To take a clear example, if Roger agrees in writing to sell a widget to Julie for $2000, Julie cannot argue that Roger orally told her she would only need to pay $1000. The Parol Evidence Rule would prevent Julie from bringing evidence of the oral agreement that contradicts the written agreement. But it does allow the terms to be 'Explained or Supplemented', if the conditions of Subsection A and B are met. There is a complicated, this section of the UCC is incredibly complicated and among other things it's important to keep in mind whether the extrinsic evidence is being offered to explain an ambiguous term or whether it's being offered as a supplemental term. The UCC always has the potential to allow extrinsic evidence including course of dealing or usage of trade or course of performance evidence to be offered to help interpret or explain an ambiguous term. But it sometimes precludes extrinsic evidence to supplement contracts. The key reasons for excluding extrinsic evidence for the purpose of supplementing is when the agreement is integrated. The restatement second of contracts defines integrated agreements as writings that constitute 'a final expression of one or more terms of the agreement'. There are two types of integrations. An integrated agreement is either partially or completely integrated. A completely integrated agreement is a final expression of all of the terms as to which the parties agreed or as the restatement puts it. An agreement adopted 'by the parties as a complete and exclusive statement of the terms of the agreement'. Nowadays, parties may choose to include a merger or integration clause which simply states that the written contract is a completely integrated one. The name merger clause is a bit misleading, it might suggest that any ancillary oral agreements are merged into and become part of the written agreement. But it means just the opposite, that any ancillary oral agreements are not merged into the enforceable part of the written agreement. A partially integrated agreement is just any integrated agreement that's not the complete and exclusive statement of all the agreed terms. It contains some, but not all of the final terms that the parties have agreed to. The difference between a complete and partially integrated contract, is an important part of the controversy in the Alyeska case. Plaintiff, appellant buyer, Alaska Northern Development (AND) submitted a letter of intent to the defendant Apelli seller, Alyeska proposing to purchase defendant's inventory of Caterpillar machinery parts. Defendant responded with a similar letter condition though, upon "Final approval of the owner committee". Neither letter specified the price for the proposed sale. At a subsequent meeting between representatives of the two firms, a price was agreed upon and added to the defendant's letter. Defendant's representative Ricketts Alyeska's manager of contracts and material management, signed this modified letter. The defendant's owners committee however refused to sell on any grounds not just because they disagreed on price. The trial court granted summary judgment for the defendant and the instant court affirmed. Before we move onto the holdings in this case let's make sure we understand the facts. What type of Parol Evidence does AND, the buyer in this case want to introduce? Well, AND wants to introduce extrinsic evidence that the parties agreed that final approval that this final approval clause was meant to limit the owners committee to consideration of whether the price was fair and reasonable and that was the only basis on which they could turn down the contract. If the owner committee rejects the contract for other reasons it would be a breach. In other word, AND wants to introduce extrinsic evidence to argue that Alyeska's conduct was a breach of the contract. The issue in this case, is whether plaintiffs Parol Evidence this extrinsic evidence, was correctly excluded at trial. The court held that yes, the exclusion of Parol Evidence was proper. There was a partial integration of the writing and given this the alleged oral agreement to limit approval to price is not a consistent additional term because it was not in reasonable harmony with the integrated writing. Before we take on the court's multi-step tests to determine whether the extrinsic evidence can be used to supplement the agreement, let's look at how the court responded to the plaintiff's argument that the extrinsic evidence should be admitted to explain an ambiguous term. Courts will only allow extrinsic evidence to be introduced to explain a written provision if that written provision is ambiguous and the extrinsic evidence is offered in support of an interpretation to which the writing is reasonably susceptible. Reasonable susceptibility is the crucial concept. In this diagram, each point inside the blue oval represents a different possible interpretation to which the writing is reasonably susceptible. Courts applying Section 2-202 would admit extrinsic evidence to help support an interpretation inside the oval. But not in interpretation that lies outside the set of interpretations to which the writing is reasonably susceptible. So, the court would allow admitting extrinsic evidence to support an interpretation let's say here, but not to support an interpretation let's say out here. So for example, imagine a written contract with a covenant not to compete, which has a smudged duration number which might have originally been written as either two or three years. A court would not allow extrinsic evidence to explain this ambiguity if the evidence was to be admitted suggested that the parties had agreed to a four year duration because the writing is ambiguous but does not reasonably susceptible to that for your interpretation. The Alyeska court similarly found that the December 11th letter was not reasonably susceptible to the interpretation advanced by AND. And that therefore, there was no merit to AND's contention that it was entitled to a jury trial on this interpretation issue. In the next video will take on the difficult multi-part test governing whether extrinsic evidence should be admitted to supplement the agreement.
