Gianni v. R. Russel & Co., Inc.

Supreme Court of Pennsylvania · Contracts

ContractsParol evidence ruleIntegrated agreementsLeasesparol evidenceintegrationwritten leaseoral agreement

Facts

Plaintiff leased a storeroom in defendant's building under a three-year written lease negotiated by defendant's agent. The lease provided that plaintiff could use the premises only for the sale of fruit, candy, soda water, and similar items, and expressly prohibited the sale of tobacco. Plaintiff claimed that, in exchange for agreeing not to sell tobacco, paying increased rent, and entering the lease, defendant orally promised him the exclusive right to sell soft drinks in the building, but that promise was not included in the lease. After the lease was signed, defendant leased an adjoining room to a drug company without restricting its sale of soda water and soft drinks, and plaintiff sued for damages.

Issue

When a written lease specifies the tenant's permitted and prohibited sales, may the tenant introduce evidence of a prior or contemporaneous oral agreement granting him the exclusive right to sell soft drinks in the building? More broadly, is such an alleged oral promise a separate collateral agreement or one within the scope of the integrated writing and therefore barred by the parol evidence rule?

Rule

Where parties, without fraud or mistake, deliberately reduce their agreement to writing, the writing is the only evidence of their agreement. If the writing appears complete within itself and imports a complete legal obligation, it is conclusively presumed to contain the whole engagement of the parties. To determine whether an alleged oral agreement falls within the writing's scope, the court compares the two and asks whether parties in that position would naturally and normally have included the oral term in the written contract if it had been made; if the oral term relates to the same subject matter and is dealt with in the writing, parol evidence of it is inadmissible absent fraud, accident, or mistake.

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In Cleveland, Nora Patel leased a lobby kiosk from Lakefront Arcade Properties under a signed one-page lease. The lease states she may sell only magazines, bottled water, and gum, and it expressly forbids the sale of lottery tickets. After another kiosk began selling bottled water, Nora sued, alleging the landlord had orally promised before signing that only her kiosk could sell bottled water in the building.

Should the court admit evidence of the alleged oral exclusivity promise?

Explanation. Where parties without fraud or mistake deliberately reduce their agreement to writing, the writing is the only evidence of their agreement if it appears complete within itself. The court compares the alleged oral term with the writing and asks whether parties in that position would naturally and normally have included the oral term in the writing. Because the lease already deals with what goods may be sold, an oral promise granting exclusive bottled-water sales concerns the same subject matter and is inadmissible. (Derived from Gianni v. R. Russel & Co., Inc. (n.d.).)