Identifying the Terms |
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§ 3.3.3. Finding and Resolving Ambiguity
Contrary to some views,202 the parol evidence rule does not preclude the admission of parol evidence for the purpose of giving meaning to an integrated, written contract’s terms. Objectivism and subjectivism both hold this to be true. Thus, the (first) Restatement of Contracts, representing a broadly objective approach, provides that parol evidence is admissible “to establish the meaning of the integration when this is required for the application of the standards stated in §§ 230, 231.” Section 230, in turn, provides:
The standard of interpretation of an integration, except where it produces an ambiguous result, . . . is the meaning that would be attached to the integration by a reasonably intelligent person acquainted with all operative usages and knowing all the circumstances prior to and contemporaneous with the making of the integration, other than oral statements by the parties of what they intended it to mean.203
Note that the enumerated elements of interpretation come into play before an ambiguity appears. The Restatement (Second) provides simply:
Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissible in evidence to establish . . .
(c) the meaning of the writing, whether or not integrated.204
A court need not find an ambiguity before admitting contextual evidence. The second Restatement, however, allows a broader range of contextual evidence than does the first Restatement. It allows, in particular, a party’s statement of its intention.205
To be sure, notwithstanding the “restatements,” almost all jurisdictions disallow parol evidence when the written contract is unambiguous, and parol evidence is offered to give meaning to the writing.206 The substantive basis of the exclusion, however, is the so-called plain meaning rule, not the parol evidence rule. There is an important distinction here.
202E.g., Peter Linzer, The Comfort of Certainty: Plain Meaning and the Parol Evidence Rule, 71 FORDHAM L. REV. 799, 801 (2002).
203RESTATEMENT (FIRST) OF CONTRACTS § 230 (1932).
204RESTATEMENT (SECOND) OF CONTRACTS § 214 (1981).
205Id. at § 212, cmt. b.
206See § 4.2.1.
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ELEMENTS OF CONTRACT INTERPRETATION |
The function of the parol evidence rule is only to identify the terms of a contract when there is an integrated writing. When applicable, its consequence is to discharge some parol agreements, leaving the integrated writing’s terms as the terms of the parties’ contract. The plain meaning rule, by contrast, comes into play whether or not a contract is integrated and only after the contract’s terms have been identified. When applicable, its consequence is to prevent a finding on the basis of parol evidence that the terms are ambiguous.207 We will consider the plain meaning rule, and distinguish it more completely from the parol evidence rule, in Chapter 4.208
207Id.
208See § 4.2.4.