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to the parties’ conduct under the contract. Moreover, many people and firms, not having access to evidence of parol agreements, rely on written contracts as such. Their reliance would be undercut if parol agreements could change the terms of integrated written contracts. In addition to implementing the parties’ intention, two key goals of contract law are to protect reasonable expectations arising from, and reasonable reliance on, promises. Protecting integrated written contracts from change by parol agreements furthers these goals with respect to many parties.
Protecting the integrity of written contracts, as such, does not seem to be a goal in itself. Rather, it should be regarded charitably as a means of implementing the first two goals. The parol evidence rule does not protect the integrity of all written contracts. It protects only those that are integrated, and only as against prior or contemporaneous written parol agreements. Because the question of integration turns on the parties’ intention to integrate their agreement, the rule is best understood to implement that intention. Courts that state the integrity goal may be mesmerized by the history of the law’s treatment of written contracts, which regarded them as virtually talismanic. Modern legal practice, however, has left such attitudes toward writings behind.
Protecting writings, because they are more reliable than the parties’ memories, is not an apt goal of the parol evidence rule. Everyone now agrees that it is a rule of substantive law, not evidence law. Concerns about the reliability of the parties’ memories are concerns of evidence law. The rule, moreover, does not fit this reliability rationale. Again, the rule renders inoperative some written parol agreements. The reliability rationale is relevant only to oral parol agreements. Prior written agreements can be produced as evidence and may be as reliable as the final written agreement with respect to what they represent. What they may represent, however, is the state of the parties’ negotiations at one point in time; as negotiations proceed, that agreement may fall by the wayside. One of the parties’ principal reasons for integrating prior agreements into a final writing is to be sure that such agreements are superseded. This reason has nothing to do with the parties’ memories.
§ 3.2. Integrated Written Contracts
As indicated above, the parol evidence rule applies when there is an integrated, written contract. The authorities agree on the requirement of a writing. One question that should be considered at this time is whether
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integrated electronic contracts, such as those made over the internet, should invoke the parol evidence rule. We will consider this question below. In addition, we will consider the kinds of integrated writings that invoke the rule—partial and complete integrations—and how to establish a document’s state of integration.
§ 3.2.1. Writings and Electronic Records
The parol evidence rule applies to all enforceable, integrated, written agreements. It should not be confused with a Statute of Frauds. Like a Statute of Frauds, the rule involves a requirement of a writing.40 A Statute of Frauds, however, requires the parties to put certain agreements into writing if they are to be enforceable. The parol evidence rule does not; it determines the terms of a contract.41 Unlike a Statute of Frauds, moreover, the existence of a writing is only part of a predicate for application of the rule, which application depends also on the parties’ intention to integrate. A Statute of Frauds, by contrast, requires a writing as a condition for the enforceability of some contracts regardless of the parties’ intention. A Statute of Frauds, additionally, applies only when a contract falls within certain subcategories of contracts, such as contracts for the sale of land. By contrast, an integrated, written contract invokes the parol evidence rule whether or not the contract falls within a subcategory. Again, unlike a Statute of Frauds, the parol evidence rule does not require that the parties sign the writing. One reason for parties to integrate may be to exclude the possibility of false testimony as to oral agreements.42 But the parol evidence rule applies also to prior written agreements.
Few courts have faced the question whether several contemporaneous writings may be pieced together to constitute a single integrated contract. One has held that they may be pieced together into one integration.43 Another has held that, if no single writing embodies the whole of the party’s understanding, the parol evidence rule has no application.44 The former holding allows contemporaneous written contracts to have operative effect. Under Article 2 of the UCC, the parol evidence rule is
40Baysden v. Roche, 563 S.E.2d 725, 726–27 (Va. 2002).
41Sterling v. Taylor, 152 P.3d 420, 425 (Cal. 2007).
42Harry J. Whelchel Co. v. Ripley Tractor Co., 900 S.W.2d 691, 693–94 (Tenn.App. 1995).
43Sawyer v. Arum, 690 F.2d 590, 592–93 (6th Cir. 1982).
44Stern & Co. v. State Loan & Fin. Corp., 238 F. Supp. 901, 911 (D. Del. 1965).
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not applicable to such contracts.45 The Restatement (Second) allows a “writing or writings” to be a partially or completely integrated agreement.46 However, if one of the writings is completely integrated, prior oral or written contracts should not establish contract terms unless they are outside the scope of that writing.47 If one of them is partially integrated, the others may establish non-contradictory additional terms even though they are within the scope of that writing. The existence of a side letter or agreement should be evidence that a written contract is integrated only partially. Such letters or agreements often are useful to the parties and may indicate their intent that the main agreement not be the complete agreement.
As of the date of this writing, no cases have been found that address the question whether an integrated electronic contract invokes the parol evidence rule. In light of the advent of widespread computerized contracting, it is inevitable that the question will be adjudicated. When it is, the parol evidence rule should be applied.
Parties can make an electronic contract in several ways. For example, they may contract by e-mail much as they might contract by paper correspondence, with a final text represented by the last two e-mails sent. They may negotiate by e-mail over a text in an attached computer file with the negotiations culminating in a final computer file that is saved to the parties’ hard drives. They may contract on terms contained on a website on the internet, whether or not a human being reviews the file. Or they may exchange a computer file on a disc or a memory stick.
Electronic contracts might be left in the form of computer files and never be printed on paper. If the parties do this, the contract is not “written” in the usual sense of the word. It can be argued that the parol evidence rule applies only when a contract is written because that is how the courts state it. An electronic contract is not written, the argument continues, so the parol evidence rule does not apply.
This argument should be rejected. It is somewhat like arguing that a printed or typewritten contract is not “written,” for purposes of the parol evidence rule, as though only handwritten contracts satisfy the writing requirement. Such an argument would be absurd. It is, moreover, a fine
45UCC § 2-202 (2001).
46RESTATEMENT (SECOND) OF CONTRACTS §§ 209(1), 210(1) (1981); see Steinke v. Sungard Fin. Sys, Inc., 121 F.3d 763, 771 (1st Cir. 1997).
47TRINOVA Corp. v. Pilkington Bros., 638 N.E.2d 572, 575 (Ohio 1994). See § 3.3.1.
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example of how a rule crafted for a purpose can be misused in a new situation, due solely to the happenstance of the language used to state it, so that its purpose is defeated. At this writing, the question is without legal precedent. It is open to the courts to hold that integrated electronic contracts invoke the parol evidence rule.
As indicated above, the chief purpose of the parol evidence rule is to implement the parties’ intention to integrate their agreement in a final, or final and complete, writing.48 A second important purpose is to protect the security of written contracts so that people and firms may rely on them without having to discover parol agreements.49 These purposes support applying the parol evidence rule when there is an integrated, electronic contract because, as with written contracts, the parties may intend to integrate their agreement. They and others, moreover, may rely on a contract in a computer file in the same way that they rely on a written contract. In particular, they may, and should be able to, rely on an integrated electronic contract without having to discover parol agreements.
This argument draws support by analogy to a number of laws concerning electronic contracting. The federal Electronic Signatures in Global and National Commerce Act50 generally places electronic contracting on an equal footing with other kinds of contracting. It applies to contracts in interstate and foreign commerce. In addition, as of 2006, forty-six states had done substantially the same thing by adopting the Uniform Electronic Transactions Act.51 Moreover, the argument draws support from the Amendments to Article 2 of the UCC, promulgated in 2003 by the National Conference of Commissioners on Uniform State Laws and the American Law Institute. Article 2’s amended parol evidence rule will be found in Section 2-202. It protects “records,” which are defined in Section 2-103(1)(m) as “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable perform.” Therefore, the amendment clearly would apply the parol evidence rule to electronic contracts. (It is not expected that the amendments to Article 2 will be widely adopted for reasons unrelated to the parol evidence rule or electronic contracting. Hence, the amendment to Section 2-202 to include records is only persuasive authority for
48See § 3.1.2.
49Id.
5015 USC §§ 7001-7006 (2000).
51See UETA § 6 (1999).