Does our merger clause keep the other side's prior promises out of the case?
It helps, but integration is a question of fact. An agreement is fully integrated when the parties adopt a writing or writings as the final and complete expression of the agreement, and whether a written agreement is integrated is a question of fact to be determined by the totality of the evidence (Whalen v. Connelly). Whalen states the rule it applied in terms of the bargain before it: the parol evidence rule applies where a "handcrafted contract contains an integration clause, where the parties were sophisticated business persons represented by counsel and of equal bargaining strength, and where terms of the alleged oral agreement reasonably would be expected to be included in the ... agreement." When an agreement is deemed fully integrated, the parol evidence rule prevents the receipt of any extrinsic evidence to contradict, or even supplement, the terms of the written agreement (Whalen). For a record governed by UCC article 2, Iowa Code § 554.2202 makes a final expression uncontradictable by a prior agreement or a contemporaneous oral agreement, while still allowing it to be explained or supplemented by course of performance, course of dealing or usage of trade, and supplemented by consistent additional terms unless the court finds the record was also intended as a complete and exclusive statement of the terms.
The trap
A merger clause does not close the record. Extrinsic evidence is admissible in Iowa as an aid to interpretation when it throws light on the situation of the parties, antecedent negotiations, the attendant circumstances and the objects they were striving to attain, and it is admissible before the issue of interpretation is reached in order to determine whether the writing is an integrated agreement at all (Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp.). The parol evidence rule also reaches only prior and contemporaneous matters and does not bar evidence of subsequent negotiations to show modification of a written contract (Whalen). Whalen goes one step further, and the step kills a clause most drafters put in: "A written contract can be amended by oral agreement and a provision in a written contract that it can be modified or rescinded only in writing is ineffective (subject, of course, to the doctrine of consideration and the statute of frauds)." The fraudulent-inducement carve-out is narrower than it sounds, and Whalen is the case that shows it: the court said that although it has allowed fraudulent inducement claims to proceed despite an integration clause, it has "done so only with regard to misrepresentations concerning facts or circumstances not included in the written contract", and it then rejected Whalen's claim because "all of the alleged representations involved matters that were specifically addressed in the integrated written partnership agreements and corresponding letter agreements", and separately because, having noted a belief in a potential fraud claim before signing the second agreement, he had waived it ("When a person with knowledge of a potential fraud enters into a new agreement concerning the same subject matter, he waives his claim to fraud in the original transaction"). So a merger clause is strongest where the alleged promise is on a subject the writing already covers. Read both results before relying on either. Whalen found the agreements integrated and shut the evidence out, because "The partnership agreements were clearly handcrafted documents and both partnership agreements contained an integration clause (section 17.7 in both)." and "To allow Whalen to proceed would vitiate the parol-evidence rule." Fashion Fabrics ran the other way on admissibility: "We believe the trial court erred in failing to consider the extrinsic evidence for each purpose."
14 authorities
The words that state the rule
An agreement is fully integrated when the parties involved adopt a writing or writings as the final and complete expression of the agreement.
The words that state the rule
Whether or not a written agreement is integrated is a question of fact to be determined by the totality of the evidence.
The words that state the rule
When an agreement is deemed fully integrated, the parol evidence rule prevents the receipt of any extrinsic evidence to contradict (or even supplement) the terms of the written agreement.
The words that state the rule
The parol evidence rule applies only to prior and contemporaneous matters; it does not bar evidence of subsequent negotiations to show modification of a written contract. Baie v. Nordstrom, 238 Iowa 866, 869 , 29 N.W.2d 211, 213 (1947). A written contract can be amended by oral agreement and a provision in a written contract that it can be modified or rescinded only in writing is ineffective (subject, of course, to the doctrine of consideration and the statute of frauds).
The words that state the rule
Although we have allowed fraudulent inducement claims to proceed despite an integration clause in a contract, we have done so only with regard to misrepresentations concerning facts or circumstances not included in the written contract.
- case266 N.W.2d 22Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp.Iowadecided 1978read it at the source ↗
The words that state the rule
We have held extrinsic evidence is admissible as an aid to interpretation when it throws light on the situation of the parties, antecedent negotiations, the attendant circumstances and the objects they were striving to attain.
- case266 N.W.2d 22Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp.Iowadecided 1978read it at the source ↗
The words that state the rule
Extrinsic evidence is also admissible before the issue of interpretation is reached in order to determine whether the writing is or is not an integrated agreement or whether, if integrated, it is completely or partially integrated.
- statuteIowa Code § 554.2202enactment date not established
The words that state the rule
Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a record intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented: 1. by course of performance, course of dealing, or usage of trade (section 554.1303); and 2. by evidence of consistent additional terms unless the court finds the record to have been intended also as a complete and exclusive statement of the terms of the agreement.
The words that state the rule
We have held the parol evidence rule applies where a “handcrafted contract contains an integration clause, where the parties were sophisticated business persons represented by counsel and of equal bargaining strength, and where terms of the alleged oral agreement reasonably would be expected to be included in the ... agreement.”
The words that state the rule
Whalen cannot establish these elements for two reasons. In the first place all of the alleged representations involved matters that were specifically addressed in the integrated written partnership agreements and corresponding letter agreements.
The words that state the rule
When a person with knowledge of a potential fraud enters into a new agreement concerning the same subject matter, he waives his claim to fraud in the original transaction.
The words that state the rule
This rule applies to the present case. The partnership agreements were clearly handcrafted documents and both partnership agreements contained an integration clause (section 17.7 in both).
The words that state the rule
Such is not the case here. To allow Whalen to proceed would vitiate the parol-evidence rule.
- case266 N.W.2d 22Fashion Fabrics of Iowa, Inc. v. Retail Investors Corp.Iowadecided 1978read it at the source ↗
The words that state the rule
We believe the trial court erred in failing to consider the extrinsic evidence for each purpose. We base this conclusion on a review of the writing and the extrinsic evidence.
“Defective” means that reading found something to correct. What you are reading is the rule as it stands after that reading.