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Determining Scope and content of Obligation

Case: Mitchell v. Lath (1928; NY) [pp. 615-619]

Parties: Plaintiff - Mitchell (respondent)

Defendant - Lath (petitioner)

Procedural History: Lower court found for P. D appealed.

Facts: Lath wanted to sell property Mitchell, and before the sale promised
Mitchell that they would remove an ice house (theirs), which was another person's
property. Relying on Lath's promise, Mitchell purchased the property, and spent
additional money on improvements. Lath did not remove the ice house, and does not
intend on doing that.

Issue: Whether the oral promise can be used to modify the written agreement of
a property sale. No.

Holding: Lower court judgment for D reversed. Complaint dismissed.

Reasoning: (Judge Andrews) Using parole evidence rule - where written contract
embodies the entire agreement of the parties.
• Exception to the parole evidence rule - In order for the oral agreement to vary
the written contract 3 conditions must exist:
○ The agreement must in form be a collateral one
○ It must not contradict express or implied provisions of the written
○ the written agreement on its face mustn’t appear to contain the complete
agreement of the parties
□ Court says P doesn’t satisfy the 3rd requirement. Written contract
doesn’t say anything about the removal of the ice house. The written contract
appears to contain all the responsibilities of each side. Basically, if the
parties had intended to agree to the ice house removal, then they would have put
it in the written contract.
• Dissent - Agrees with majority as to the general rule used, but differs with the
application. Believes there is good evidence for the existence of the oral
promise, and that P reasonably relied on it. But since there's no independent
consideration for the removal of the ice house, it can only be enforceable if its
tied to the same consideration as the written K. Also, the oral K doesn’t
contradict anything in the written K (condition #2), since there is nothing in the
written K that says D can do only that which is explicitly stated in the writing.
In regards to condition #3, Lehman doesn’t think it's so closely connected to the
principle sale, since it's on another property, as to make it void, as the
majority sees it. Question is whether the parties intended to make the oral-
agreement void by not mentioning it in the written K.

• Parole Evidence Rule - will define the limits of the contract to be construed
○ It applies, however, to attempts to modify such a contract by parol.
• The parole evidence rule does not affect a parol collateral K distinct from and
independent of the written agreement
○ Williston says (problem): 2 separate Ks, one written, one oral. It may be
that one was entered into on the condition of the other.
□ Here, the oral K is the icehouse.
□ Is the bond sufficiently close, and if bond is really close,
then the evidence is excluded under parole evidence rule.
® Idea: if they are part of same subject, and closely
related, then written K should have it included
□ So, we want to know: How close is the bond?
• Parole evidence doesn’t apply to exclude evidence of fraud
○ Rest. § 214. Evidence Of Prior Or Contemporaneous Agreements And
□ Agreements and negotiations prior to or contemporaneous with the
adoption of a writing are admissible in evidence to establish
(a) that the writing is or is not an integrated agreement;
(b) that the integrated agreement, if any, is completely or
partially integrated;
(c) the meaning of the writing, whether or not integrated;
(d) illegality, fraud, duress, mistake, lack of consideration, or
other invalidating cause;
(e) ground for granting or denying rescission, reformation,
specific performance, or other remedy.

• Elements of the parole evidence rule (if all are present, then use parole
○ The alleged agreement must be collateral (collateral means separate)
○ Doesn’t contradict written K
○ 3rd element is hard to describe. Court uses 3 definitions:
□ Wouldn’t ordinarily expect the terms of the alleged oral K to be
included in the written K at issue
□ Based on written K + surrounding circumstances indicate an
incomplete agreement
□ Must not be too closely connected to the principle transaction
• If parole evidence comes in, the jury gets to decide if the oral agreement
actually existed. If yes, then it will change the written K.

• What element(s) are missing here?

○ court says maybe it doesn’t meet the 2nd either - maybe it does contradict
the written element. But court doesn’t decide this.
○ 3rd - where the line btwn the admissible and inadmissible evidence is
narrow - can't always use precedent, each case depends on its own facts, so can't
depend on a definite rule
□ ***How closely bound to the K is the supposed collateral agreement is
the decisive factor in each case
• Dissent: Lehman agrees completely on the elements. Says the question we must
decide is whether or not, assuming an agreement was made for the removal of the
ice house from one parcel of land as an inducement for the purchase of another
parcel, the parties would ordinarily or naturally be expected to embody the
agreement for the removal of the ice house from one parcel in the written
agreement to convey the other parcel.