21. Contracts: Parol Evidence Rule Part 4: Integration & UCC

>> Parol evidence rule Part 4,

integration and the UCC.

The UCC approach to integration is

substantially similar to
the restatement approach,

although the UCC avoids
using the term integration.

Under UCC Section 2-202,

if the writing is intended as final,

that is integrated then the terms may

not be contradicted by extrinsic evidence.

The writing may be supplemented
by consistent additional terms

unless it is a complete and exclusive
statement of the terms of the agreement.

That is a complete integration.

In other words, if the writing
is only partially integrated,

it can be supplemented by
consistent additional terms,

but if it is a complete integration,

then it cannot be supplemented
with three exceptions.

According to UCC Section 2-202,

all integrated agreements may
be explained or supplemented.

The reasoning for allowing these types

of evidence is found
in official comment 2,

which says that these types
of evidence are part of

the background understandings of the
parties that unless carefully negated,

they become part of the contract.

The UCC has one final twist.

According to official comment 3,

now this appears to be a variation on
restatement Section 216 Subsection 2,

where if a term would
naturally be omitted,

then the court can conclude that the
agreement is only partially integrated.

Two points to make about this language.

One, despite that must it is not

part of the statutory language
and so is not binding on a court.

Two, commentators agree that

the UCC standard is more willing
to admit additional terms.

Under the restatement, oral terms come in

only if they would naturally have
been omitted from the writing,

while under the UCC,

the oral terms come in unless they

would certainly have been
included in the writing,

in which case they are kept out.

Commentators believe that it
is more difficult to show that

an oral term would certainly have
been included in the writing.

It is more likely the oral term
will be allowed in under the UCC.

To summarize, an unintegrated writing
does not present a PER issue.

If the writing is completely integrated,

the PER applies fully and extrinsic
evidence is not allowed to contradict

or to add a new term to

the written terms unless the
case involves the sale of goods,

in which case, course of dealing,

usage of trade or course performance
are admissible to supplement,

that is, add a term to the written terms,

but not to contradict them.

The most complicated situation arises
when one party argues that writing

is partially integrated and that there

are additional oral terms that
don't appear in the writing.

The rules for how a judge
determines a partial from

a complete integration get tricky
and the cases go all over the map.

In some, it's a mess.