or advance notice.”145 It also contained an unambiguous merger clause stating specifically that there were no agreements contrary to the at-will provision. The court held that the contract was integrated with respect to the termination provision; that is, it was partially integrated. It reasoned that the merger clause’s content was supported by the circumstances surrounding execution of the contract. Thus, the employee had read the agreement, including the termination provision, and had expressed reluctance to sign it but did so anyhow. The court here focused on the document and its circumstances without taking into account prior negotiations or other evidence. This focus seems like the objective approach. The subjective approach, however, encompasses the literal import of the document, if any, and the objective circumstances.146 It encompasses more elements if relevant evidence is available. If there is no more, the inference as to subjective intention will be drawn from the document as a whole, its purpose(s), and its objective circumstances.

§ 3.3. Non-Consequences of Integration

We have already stated the consequences under the parol evidence rule of integrating an agreement: In brief, if a contract is completely integrated, parol agreements cannot contradict or add to the written terms; if a contract is partially integrated, parol agreements cannot contradict but may add to the written terms.147 Here, to avoid confusion, we will consider several consequences that the parol evidence rule does not have. The rule makes parol agreements inoperative only if evidence of the parol agreement is offered for the purpose of contradicting or adding to an integrated contract’s terms. Parol evidence is admissible if offered for other purposes.148 It is a mistake to believe that the parol evidence rule precludes the admission of any extrinsic evidence whatsoever, even when the writing is fully integrated. All depends on the purpose for which the evidence is offered.

145Id. at 21, 23.

146Berg, 801 P.2d at 229.

147See § 3.1.1.

148Alstom Power, 849 A.2d at 811; RESTATEMENT (SECOND) OF CONTRACTS § 214 (1981); RESTATEMENT (FIRST) OF CONTRACTS § 238 (1932).

§ 3.3.1. Collateral Agreements

Under the collateral agreement rule, a collateral parol agreement is operative, and proof of it is admissible, notwithstanding the parol evidence rule. Confusion may set in—needlessly—due to an ambiguity in collateral agreement as the term is used by the courts. Some cases use this term to refer to a parol agreement that adds to, but does not contradict, a partial integration. But other cases use the term to refer to a parol agreement that is made for a separate consideration and does not contradict and is outside the scope of a completely integrated agreement.149 The first usage is superfluous because the parol evidence rule allows non-contradictory additional terms for partially integrated agreements in any event, without resort to the collateral agreement rule. In this discussion, the term will encompass only the second usage.

The collateral agreement rule, thus understood, makes good sense. Not all parol agreements are made in the course of negotiations leading up to an integrated contract. Parties may have a web of contracts between them—each involving a separate consideration—on a host of subjects. If this is so, it may not be their intention to wipe the slate clean of all earlier contracts each time they conclude an integrated contract, whether or not it contains a merger clause, and whatever a merger clause may say.150 Again, earlier agreements beyond a later contract’s scope were probably out of sight and out of mind when the later contract was concluded. The parties would not intend to discharge such independent contracts. In many cases, however, it is difficult to say whether a parol agreement is independent. As we shall see, some agreements made during negotiations leading to an integrated contract are held to be collateral because they are independent. The question turns on the parties’ intention as determined by the court, looking at the whole document at the least.151

A case in which there was a collateral agreement is Lee v. Joseph E. Seagram & Sons, Inc.152 The plaintiffs, a father and two sons, owners of a

149Stimac v. Wissman, 69 N.W.2d 151, 154 (Mich. 1955); see Mitchill v. Lath, 160 N.E. 646, 647 (N.Y. 1928).

150See Brennan v. Carvel Corp., 929 F.2d 801, 808 (1st Cir. 1991). But cf. Childers Oil Co., Inc. v. Exxon Corp., 960 F.2d 1265, 1270 (4th Cir. 1992) (taking into account a merger clause along with other, determinative factors).

151Brennan, 929 F.2d at 808; RESTATEMENT (SECOND) OF CONTRACTS § 213(2), cmt. c (1981).

152552 F.2d 447 (2d Cir. 1977).

fifty-percent interest in a liquor distributorship in Washington, DC, offered to sell their interest to a distiller on condition that the distiller agree to relocate the sons in a new distributorship in a different city. Following negotiations, a written contract for a sale of the interest was signed, but it did not contain the agreement for the distiller to relocate the sons. When the distiller failed to relocate the sons, the sellers claimed that it breached an oral contract to relocate them. The distiller relied on the parol evidence rule to deny the sellers’ claim.

The court, applying New York law, held that the oral agreement was enforceable as a collateral agreement due to six factors. First, the parties to the two agreements were different—the sellers personally were the parties to the oral agreement and their corporation was the party to the written agreement.153 Second, as with many sales of corporations, side agreements (such as consulting agreements) would be anticipated. Third, there was a close relationship of confidence and friendship over many years between the father and the president of the distiller; from this, it may be inferred that a handshake would suffice between them. Fourth, the president had made the oral promise, but negotiations were conducted for the distiller by others who may not have had the two transactions together in their minds. Fifth, there was no merger clause. Sixth, there was no contradiction between the oral and written agreements. Together, the document and its circumstances indicated that the oral agreement was not one that the parties “would ordinarily be expected to embody in the writing”154 had they made it and meant to keep it alive.

A court will hold that the allegedly collateral agreement was within the scope of the writing, and therefore inoperative, when the topic of the parol agreement was treated in the integrated writing.155 Thus, in Rainey v. Travis,156 an integrated prenuptial agreement provided that the wife would have an unconditional right to live in the couple’s home for the rest of her life after her husband’s death. Against a claim that a collateral agreement required the wife to live alone and not to use the house for any immoral purpose, the court held that the alleged collateral agreement

153Accord, Marinelli v. Unisa Holdings Inc., 655 N.Y.S.2d 495, 496 (App.Div. 1997).

154Lee, 552 F.2d at 451.

155See Quorum Health Resources, Inc. v. Carbon-Schuykill Community Hospital, Inc., 49 F.Supp.2d 430 (E.D.Pa. 1999).

156850 S.W.2d 839 (Ark. 1993).

“relate[d] directly” to the unconditional right and, therefore, was precluded by the parol evidence rule.157

A leading and controversial case is Mitchill v. Lath.158 A prospective buyer of a farm objected to the presence of an icehouse on adjacent land owned by someone other than the seller. The seller promised orally to remove the icehouse after the conveyance, in consideration of the purchase of the farm by the buyer. The buyer relied on this promise and concluded a written contract for the sale of the farm. The buyer paid, and the seller conveyed. The seller, however, did not remove the icehouse, and the buyer brought an action for breach of contract. The New York Court of Appeals held that the icehouse agreement was not collateral to the land sale contract and, consequently, would not be enforced.

Mitchill established New York’s doctrinal law of collateral agreements. To have operative effect,

(1) [t]he [parol] 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. . . .159

The court affirmed that the icehouse agreement was collateral in form and that it did not contradict the provisions of the contract of sale. Moreover, the allegedly collateral agreement was one that parties ordinarily would be expected to embody in the writing.160 It considered the written contract and its surrounding circumstances. The contract contained all of the standard terms in the typical land sale contract and therefore appeared to be complete. The presence of the icehouse on adjacent land and the buyer’s objection to it, the court said, would not lead one to believe that there was a separate agreement.

In dissent, Judge Lehman accepted the court’s doctrinal statement but argued that it did not apply to the case so as to render the icehouse agreement unenforceable.161 He conceded that the written agreement was completely integrated. He wrote, however, that the land sale contract covered a limited field that did not include the icehouse agreement. He relied mainly on the fact that the written contract was for the sale of the

157Id. at 841. See also Gianni, 126 A. at 792.

158160 N.E. 646 (N.Y. 1928).

159Id. at 647.

160Id.

161Id. at 648–50.