Hatley v. Stafford

Supreme Court of Oregon · 1978 · Contracts

ContractsParol Evidence RulePartial Integrationparol evidencepartial integrationintegrationconsistent additional termsnot inconsistent

Facts

The parties executed a short handwritten lease for approximately 52 acres through September 1, 1975, for growing wheat, at $50 per acre. The writing gave Stafford Farm the right to "buy out" Hatley at his cost per acre, not to exceed $70 per acre, for the express purpose of developing a mobile home park, but it said nothing about how long that buy-out right would last. Plaintiff alleged that the parties had also orally agreed that the buy-out provision could be exercised only within 30 to 60 days after execution of the lease. Defendants later took possession in June 1975 and cut the immature wheat crop, claiming they had exercised the written buy-out right; plaintiff claimed trespass and sought the crop's value.

Issue

When a written lease contains a buy-out provision but is silent as to the duration of that provision, may the court admit evidence of an alleged contemporaneous oral agreement limiting the time for exercise of the buy-out right? More broadly, under Oregon's parol evidence rule, when may consistent additional oral terms be admitted on the theory that the writing was only a partial integration?

Rule

The parol evidence rule applies only to aspects of a bargain the parties intended to memorialize in the writing. In partial integration cases, evidence of an oral term is admissible only if the term is not inconsistent with the writing and is such an agreement as might naturally be made as a separate agreement by parties situated as were the parties to the written contract. For this doctrine, an oral term is "inconsistent" only if it contradicts an express provision in the writing. The court, not the jury, decides whether the writing was intended as a complete integration for purposes of admissibility; if admitted, the jury decides whether the oral term was actually agreed upon.

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One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Boise, Naomi Kerr leased a warehouse bay to Eli Torres under a two-page handwritten agreement. The writing gave Naomi the right to reclaim the bay to install refrigeration equipment, but it said nothing about when that right expired; Eli offers evidence that the parties orally agreed Naomi had to exercise that right within 20 days of signing.

Should the court admit Eli's parol evidence of the 20-day oral limit?

Explanation. Under the majority rule, an oral term in a partial integration case is admissible only if it is not inconsistent with the writing and is of a type that might naturally be made separately by parties in these circumstances. "Inconsistent" is defined narrowly: the oral term must contradict an express provision of the writing. Here, the writing is silent on duration, so a 20-day oral limit does not contradict an express written term. Separate consideration is one possible route, but not the only one.