DD 1/22/07 Court will exclude parol evidence even without integration clause where court concludes contract is complete.

Daily Development for January 22, 2007
by: Patrick A. Randolph, Jr.
Elmer F. Pierson Professor of Law
UMKC School of Law
Of Counsel: Blackwell Sanders Peper Martin
Kansas City, Missouri
dirt@umkc.edu

VENDOR/PURCHASER; SPECIFIC PERFORMANCE; PAROL EVIDENCE RULE: A buyer may obtain specific performance of a written agreement of sale, notwithstanding parol evidence suggesting different terms, where the court concludes that the contract was integral, despite the absence of an integration clause, and there is no evidence of fraud or misrepresentation.. 

Carrow v. Arnold, 2006 WL 3289582 (Del. Ch. Oct. 31, 2006). 

Carrow, as seller, entered into an agreement of sale with Arnold, as buyer, for his 223 acre farm.  Carrow asserted that Arnold made certain representations prior to contract execution to induce Carrow to sell,  and Carrow sought to admit parol evidence to rescind the contract based on allegations of fraud and misrepresentation.  Arnold responded that the agreement of sale was integrated and the parol evidence rule barred consideration of the earlier communications and counterclaimed for specific performance.

It’s an old story.  Carrow was an aging farmer, and Arnold was a real estate developer.  Allegedly, in the course of negotiations, Arnold represented to Carrow that “nothing would change” on the farm for Carrow during Carrow’s lifetime, that Arnold was acquiring the farm for a hunting preserve.  Carrow alleged a series of statements by which Arnold led Carrow to believe that the property would be developed.  Indeed, even after the contract was signed, Arnold, discussing the transfer of portions of the farm to the local Nature Conservancy, discussed the preservation of rights in Carrow during Carrow’s lifetime.

While the contract was still executory, Carrow learned that it was likely that Arnold would subdivide and sell portions of the farm right away, and therefore sought declaratory relief establishing that the agreement contemplated that Arnold would retain the property and that Carrow would be able to farm it (by leasing it back).  The agreement did contain a statement that Carrow would have a life estate on his home place and small acreage, but the dispute had to do with the farming rights in the rest of the land.   

 Carrow sought admission of the parol evidence rule under one or both of two exceptions: (1) for instances where the contract language is ambiguous, and (2) when the contract is the product of fraud or misrepresentation.  The court determined that neither exception applied to the instant case.  In general, the court found that there were no specific representations of fact, and that at best Arnold indicated attitude and conjecture.  Further, the court noted, the contract directly contradicted some of the expectations that Carrow claimed he had, and therefore Carrow could not reasonably have relied upon inconsistent statements that he had heard before the contract. 

The agreement did not contain an integration clause, and the court acknowledged that the presence of such clause creates a presumption that the written statement is complete, and that such presumption does not exist otherwise.  Carrow relied on this to show that other parts of the parties’ negotiations should be taken into account in stating their agreement. 

But the Court found that other circumstances supported the conclusion that the writing was a final expression of the parties' intent by virtue of the fact that it was formally typewritten, that the signatures were acknowledged by a notary, that Carrow had negotiated certain changes to the contract, that Carrow had the opportunity to consult with other professionals to review the document, and that Carrow had consulted with his accountant and had met with the buyer and accountant at that meeting.   (Carrow used his accountant in negotiations, but never hired an attorney.) 

Comment 1: The case raises the interesting issue of when a court will find a contract integrated.  It’s useful analysis for presenting evidence to a court.  But note that the court in fact discusses the evidence anyway, since Carrow’s lawyer was able to get most of it into court in order to establish the fraud claim.  An interesting and effective tactic.

Still, the court used the somewhat common sense approach to conclude that Carrow couldn’t have been relying upon these other promises when the contract unambiguously created rights in Arnold that were inconsistent with Arnold’s expectations.  Thus, in one fell swoop, the court decided the fraud claim and simultaneously rendered moot any argument that Carrow and Arnold in fact had an agreement contrary to what the written contract stated.

Comment 2: The editor is a bit less comfortable with the stress on the presence of notaries and typewritten agreements.  A crafty charlatan might indeed use these devices to bootstrap an otherwise shady deal into legitimacy.  But the editor, based upon the court’s analysis, tends to agree that this probably didn’t happen here.  Carrow admitted that he should have studied the deal more.  Indeed, he should have had a lawyer do so.   It’s not that there might not have been some aggressive and even misleading promotion of the deal - there very well might have been - the problem is that even aging farmers have the right and responsibility to do business on the basis of formal agreements, and should read what they sign and accept the consequences. 

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