farm while the icehouse was on other land. Consequently, in his view, the icehouse agreement would not ordinarily have been included in the writing.

The majority’s reasoning and the result in Mitchill should be criticized. The majority relied entirely on the document and the circumstance that the buyer had objected to the icehouse. There is no basis here, and it is a non sequitur, to infer an intention—objective or subjective—to negate the icehouse agreement. The document, moreover, contained terms only for the sale of identified real property, the farm. It contained nothing relating to the adjacent land. The written contract was complete with respect to the sale of the farm, but there was no indication in the document or surrounding circumstances that its scope went beyond that land. Its contents were those of a standard land sale contract, whose scope normally is limited to the land to be conveyed and the price to be paid, on various conditions, not services to be performed. Consequently, the icehouse agreement normally would have been left out of the land sale contract and should have been given effect. (Nonetheless, Mitchill’s doctrinal force has been strong in New York.162)

§ 3.3.2. Formation, Invalidating Causes, and Conditions

The parol evidence rule comes into play only when there is an enforceable, integrated, written agreement. Parol evidence consequently is admissible to show that there was no binding agreement.163 Thus, parol evidence can be admitted to show that there was no acceptance or a want or failure of consideration,164 that the parties did not intend an agreement to be legally binding,165 that the contract was invalid due to fraud,166 duress,167 illegality,168 unconscionability,169 or public policy,170 that the

162See, e.g., Fogelson v. Rackfay Const. Co., 90 N.E.2d 881 (N.Y. 1950).

163Ensign Painting Co. v. Alfred A. Smith, Inc., 188 N.W.2d 534, 535–36 (Mich. 1971); Kitley v. Abrams, 299 F.2d 341, 345 (2d Cir. 1962); RESTATEMENT (SECOND) OF CONTRACTS §§ 213, 214(d) (1981).

164Coast Bank v. Holmes, 97 Cal. Rptr. 30, 35 (Cal.App. 1971).

165National City Bank, Akron v. Donaldson, 642 N.E.2d 58, 61 (Ohio App. 1994).

166Ernst Iron Works v. Duralith Corp., 200 N.E. 683, 684 (N.Y. 1936).

167Jones v. Franklin, 168 S.E. 753, 754 (Va. 1933).

168Commonwealth v. Weinfield’s, Inc., 25 N.E.2d 198, 200 (Mass. 1940).

169Bassler v. Bassler, 593 A.2d 82, 88 (Vt. 1991).

170Schara v. Thiede, 206 N.W.2d 129 (Wis. 1973).

agreement was a sham,171 or that the parties agreed by parol that the contract should become binding only on the occurrence of a condition precedent.172 Of these, only the fraud and conditions cases need be discussed because the other issues are transparent.

§ 3.3.2.1. Fraud

Most authorities hold that claims of fraud, based on parol agreements, representations or promises, are allowed.173 In such cases, the parol evidence is not being offered to establish the terms of the contract. Instead, it is being offered to show that the contract was void or voidable. Consequently, the parol evidence rule should not come into play.

The result may be different in a few jurisdictions if the claim is promissory fraud and the parol promise contradicts a promise in the written contract. Thus, the Supreme Court of California has held that the parol evidence rule precludes proof that an integrated contract was fraudulently induced by a parol promise made with knowledge that it could not be kept.174 The written contract was one for the sale of an oven and related equipment. It contained a promise that the oven would produce a certain quantity of tortillas per hour. After ten days of testing and correctional measures, the buyer signed an acceptance stating that it had observed the oven in operation and was satisfied with its production capacity. Sometime later, the buyer brought an action against the seller for breach of contract and fraudulent misrepresentation. It argued that the seller had made an oral promise—knowing it could not be kept—that the oven would produce a greater quantity of tortillas than that spelled out in the written contract. It lost that lawsuit on appeal. In the seller’s subsequent action against the buyer for malicious prosecution, the court considered whether the seller had satisfied the favorable termination element of a malicious prosecution claim. The court rejected the buyer’s argument on the basis that the parol evidence rule, as a rule of substantive law,

171Herzog Contracting Corp. v. McGowen Corp., 976 F.2d 1062, 1067–71 (7th Cir. 1992).

172Hicks v. Bush, 180 N.E.2d 425, 427 (N.Y. 1962).

173RESTATEMENT (SECOND) OF CONTRACTS § 214(d) (1981); 2 FARNSWORTH, supra note 2, at § 7.4. But see Ungerleider, M.D. v. Gordon, 214 F.3d 1279 (11th Cir. 2000) (to make out an exception to the parol evidence rule, a representation that induced entry into contract must not contradict the written contract).

174E.g., Casa Herrera, 83 P.3d at 503. See also HCB Contractors v. Liberty Place Hotel Assocs., 652 A.2d 1278, 1279–80 (Pa. 1995).

rendered the alleged parol promise “non-existent.”175 The rule, it said, “establishes, as a matter of law, the enforceable and incontrovertible terms of an integrated written agreement.”176 Further, California courts had “consistently rejected promissory fraud claims premised on prior or contemporaneous statements at variance with the terms of a written integrated agreement.”177

The court’s reasoning should be challenged. The parol evidence rule does not render a parol promise “non-existent.” Such promises are not legally operative to ground the parties’ contractual rights, duties, and powers. But they continue to exist as a matter of fact. A claim of promissory fraud rests in part on the fact that a party made a promise without a present intention to keep it.178 When such a claim is recognized, the promise is not given legal effect; that is, there is no action for breach of it. A better rationale rests on the reliance element of a claim of promissory fraud. A contract term that is inconsistent with a parol agreement or promise arguably makes reliance on the parol commitment unreasonable. If so, an action for fraud will not succeed.179

To probe more deeply, the reliance argument also can be challenged. Consider another case in which there is a claim of promissory fraud based on a parol promise. The defendant relies on a merger clause in an integrated, written contract to argue that any reliance on that promise would be unreasonable. If the merger clause makes the written contract an integrated one, the parol promise is non-existent under the California Supreme Court’s reasoning. No fraud action then is possible. By contrast, the New York Court of Appeals has held that a general merger clause integrating an agreement does not cut off a claim of promissory fraud on reliance grounds.180 The Supreme Court of New Hampshire has held that a contractual disclaimer providing that a party “makes no representations” as to specific matters does not cut off such a claim.181 To have that effect, the parties must agree to a specific “no reliance clause,” stipulating that “a party is not relying on any representations as to the very

175Casa Herrera, 83 P.3d at 504.

176Id. at 503.

177Id. at 504.

178Sabo v. Delman, 143 N.E.2d 906, 908 (N.Y. 1957); PROSSER AND KEETON ON THE LAW OF TORTS § 109 (W. Paige Keton, et al., eds., 5th ed. 1984).

179Hamade v. Sunoco, Inc., 721 N.W.2d 233, 249–50 (Mich.App. 2006).

180Sabo, 143 N.E.2d at 906 ((as distinguished in Danaan Realty Corp. v. Harris, 157 N.E.2d 597, 598–99 (N.Y. 1959)).

181Van Der Stok v. Van Voorhees, 866 A.2d 972, 975–76 (N.H. 2005).

matter as to which it . . . claims it was defrauded.”182 If general merger clauses, disclaimers of representations, and general no-reliance clauses do not cut off such a claim, it seems a fortiori that a mere inconsistency between a parol promise and a written promise should not have that effect. The law should not “provide a blueprint for defrauding parties to shield their wrongdoing,”183 especially through the use of boilerplate clauses.

§ 3.3.2.2. Conditions Precedent

Notwithstanding the parol evidence rule, it is well settled that evidence of a parol agreement is admissible for the purpose of establishing a parol condition precedent to the legal effectiveness of an integrated, written contract.184 Again, the parol evidence rule does not come into play. Such evidence is not being offered to establish contract terms but, rather, to show that the written agreement never became enforceable. For parol evidence of a condition to be allowed, the relevant condition must be to the legal effectiveness of the agreement and, therefore, to both parties’ obligations.185 A party cannot, however, prove such a parol agreement if it contradicts the explicit terms of the written contract. Thus, a written contract providing that the parties consent to it “irrevocably and unconditionally” will not be undermined by a parol condition to its effectiveness.186 A court might not allow evidence of an oral promise not to enforce an arbitration clause in a contract because such a promise does not constitute a condition precedent to the legal effectiveness of the contract but, instead, of a clause in the contract.187

Absent such clearly contradictory language, however, matters can become murky. The leading case on the question is Hicks v. Bush.188 The written contract provided for a merger of two corporations into a

182Danaan Realty Corp. v. Harris, 157 N.E.2d 597, 598–99, 606 (N.Y. 1959); see Travelodge Hotels, Inc. v. Honeysuckle Enters., Inc., 357 F.Supp. 2d 788 (D.N.J. 2005); Slack v. James, 614 S.E.2d 636, 640–41 (S.C. 2005).

183American Hardware Manufacturers, Ass’n v. Reed Elsevier, Inc., 2005 WL 3236590, at *5 (N.D. Ill. 2005).

184RESTATEMENT (SECOND) OF CONTRACTS § 217 (1981).

1852 FARNSWORTH, supra note 2, at § 7.4.

186Bank Leumi Trust, 735 F.Supp. at 78; Braten, 456 N.E.2d at 805.

187Glazer v. Lehman Bros., Inc., 394 F.3d 444, 454–59 (6th Cir. 2005).

188180 N.E.2d 425 (N.Y. 1962).

new corporation. Owners of the two corporations were to subscribe for stock in the new one within five days after the written agreement was made. The agreement provided:

If within twenty-five days after the date hereof [the new corporation] shall have failed to accept any of said subscriptions delivered to it . . . then and in any such event the obligations of all of the parties hereto shall be terminated and cancelled.189

One of the two corporations subscribed, but the other did not, and the deal fell through. In an action for specific performance, the defendant offered testimony that the written agreement was signed “upon a parol condition” that it “was not to operate” as a contract and that the contemplated merger was not “to become effective” until they acquired funding in a certain amount.190 The trial judge admitted the testimony, and the plaintiff appealed.

The New York Court of Appeals ruled, first, that parol evidence is admissible to prove an “oral condition precedent to the legal effectiveness of a written agreement.”191 Second, however, such a condition precedent must not contradict the express terms of that agreement. On the facts, the defendant argued that the parol condition would contradict the contract provision quoted above. The court rejected this argument. It held that the parol condition was “simply a further condition—a condition added to that requiring the acceptance of stock subscriptions within 25 days.”192 The court did not rest its holding on logical analysis of the question of contradiction. That might have shown that the parol condition contradicted the express words “then and in any such event” the parties’ obligations would be canceled. Those words may signal that cancellation would occur only if the new corporation failed to accept a subscription. Instead, the court reasoned that the parol condition was the sort of condition that the parties would not be inclined to incorporate into a written agreement intended for the public.193

189Id. at 426.

190Id.

191Id. at 427.

192Id.

193Hicks, 180 N.E.2d at 428.

§ 3.3.2.3. Reformation

The parol evidence rule does not discharge a parol agreement when a party seeks reformation of a contract.194 This is a true exception to the rule. To get reformation, the party seeking it must prove that, unknown to either party, their true agreement differed materially from the written agreement.195 Examples are typographical and transcription errors, or the parties’ inattention to the writing.196 Alternatively, the party seeking reformation can prove that, unknown to her but known to the other, who has mislead her with respect to the writing’s contents, the written contract does not express the agreement.197 Either way, parol evidence is essential to justice. This exception is based mainly on the premise that the parties’ intend to replace their subjective agreement with an accurate written contract.198 They do not intend to supersede it.

It might be thought that a party can simply allege a mutual mistake of the kind that would entitle it to reformation and thereby require the court to admit evidence of a parol agreement. This move would end-run the parol evidence rule. In practice, however, the reformation exception normally does not end-run the rule as a practical matter. Two features of reformation law make the remedy difficult to obtain. First, to survive a motion for summary judgment, a party seeking reformation must offer much more than an unsupported allegation that the writing does not reflect the true agreement.199 The burden of proof is high: “[T]o be entitled to reformation, a party must establish that the undisputed material facts fully, clearly, and decisively show a mutual mistake.”200 Second, reformation is an equitable doctrine. A court may withhold it as a matter of discretion, as when it thinks a party seeks reformation as a strategic pretext.201 No jury is involved. Consequently, courts frequently apply the parol evidence rule despite the reformation exception.

194Patton v. Mid-Continent Sys., Inc., 841 F.2d 742, 746 (7th Cir. 1988).

195Chimart Assocs. v. Paul, 489 N.E.2d 231, 233–34 (N.Y. 1986).

196OneBeacon America Ins. Co. v. Travelers Indem. Co. of Illinois, 465 F.3d 38, 41–42 (1st Cir. 2006).

197Hempel v. Nationwide Life Ins. Co., Inc., 370 A.2d 366, 371 (Pa. 1977).

198See Patton v. Mid-Continent Sys., Inc., 841 F.2d 742, 746 (7th Cir. 1988).

199Chimart Assocs., 489 N.E.2d at 235–36.

200OneBeacon America, 465 F.3d at 41 (internal quotation marks omitted).

201RESTATEMENT (SECOND) OF CONTRACTS § 155, cmt. d (1981).