Cal

Cal. Code Civ. Pro. 1856

(a) Terms set forth in a writing 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.

(b) The terms set forth in a writing described in subdivision (a) may be explained or supplemented by evidence of consistent additional terms unless the writing is intended also as a complete and exclusive statement of the terms of the agreement.

(c) The terms set forth in a writing described in subdivision (a) may be explained or supplemented by course of dealing or usage of trade or by course of performance.

(d) The court shall determine whether the writing is intended by the parties as a final expression of their agreement with respect to such terms as are included therein and whether the writing is intended also as a complete and exclusive statement of the terms of the agreement.

(e) Where a mistake or imperfection of the writing is put in issue by the pleadings, this section does not exclude evidence relevant to that issue.

(f) Where the validity of the agreement is the fact in dispute, this section does not exclude evidence relevant to that issue.

(g) This section does not exclude other evidence of the circumstances under which the agreement was made or to which it relates, as defined in Section 1860, or to explain an extrinsic [sic? intrinsic] ambiguity or otherwise interpret the terms of the agreement, or to establish illegality or fraud.

(h) As used in this section, the term agreement includes deeds and wills, as well as contracts between parties.

Law Revision Commission Comment:

    Section 1856 is amended to restate the substance of the parol evidence rule for contracts and other written instruments. Its application to other written instruments is subject to express statutory provisions relating to admissibility of extrinsic evidence. See, e.g., Probate Code ง 105 (excluding oral declarations of testator); Estate of Russell, 69 Cal.2d 200, 212, 444 P.2d 353, 361, 70 Cal. Rptr. 561, 569 (1968). For the law applicable to contracts for the sale of goods, see Commercial Code Section 2202. Section 1856 governs the admissibility of parol evidence notwithstanding any implications to the contrary in Civil Code Sections 1625, 1638, and 1639 (creation and interpretation of contracts). Nothing in Section 1856 is intended to affect any statute requiring the terms of a contract to be in writing. See, e.g., Civil Code งง 1624 (statute of frauds), 1803.1-1803.8 (retail installment contracts), 1812.52 (dance studio contracts).

    Subdivisions (a) and (b) make inadmissible parol evidence in a few limited cases. These cases are discussed below.

    If the written instrument is intended by the parties as the final embodiment of the terms contained in it, subdivision (a) makes parol evidence inadmissible to contradict those terms. Subdivision (a) is comparable to the introductory portion of Commercial Code Section 2202 and codifies prior law. See, e.g., American Nat'l Ins.Co. v. Continental Parking Corp., 42 Cal. App.3d 260, 116 Cal. Rptr. 801 (1974) (hearing denied). The issue of the finality of the terms of the agreement is a matter for court determination under subdivision (d). This also codifies prior law. See, e.g., Brawthen v. H & R Block, Inc., 28 Cal. App.3d 131, 104 Cal. Rptr. 486 (1972). Subdivision (a) does not make inadmissible evidence of a contemporaneous written agreement that contradicts the terms of the main written agreement even though final. Cf. Civil Code ง 1642 (several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction are to be taken together).

    As a general rule, evidence of consistent additional terms is admissible to explain or supplement the terms of an agreement notwithstanding the finality of the terms of the agreement. Because a writing has been worked out which is final on some matters, it is not to be taken as including all the matters agreed upon unless it is also a complete and exclusive statement of all the terms. Subdivision (b) makes inadmissible evidence of consistent additional terms, whether or not reduced to writing, if the written instrument was intended by both parties as a complete and exclusive statement of all the terms. Subdivision (b) is comparable to subdivision (b) of Commercial Code Section 2202 and codifies prior law. See, e.g., Masterson v. Sine, 68 Cal.2d 222, 436 P.2d 561, 65 Cal. Rptr. 545 (1968). The issues of completeness and exclusivity are matters for court determination under subdivision (d). This also codifies prior law. See, e.g., Brawthen v. H & R Block, Inc., 28 Cal. App.3d 131, 104 Cal. Rptr. 486 (1972). One indication of the completeness and exclusivity of the writing is whether the additional term is such that, if agreed upon, it would certainly have been included in the writing.

     The foregoing discussion of subdivisions (a) and (b) indicates the extent of the limitations imposed by Section 1856. Except to the extent indicated in that discussion, the section does not make inadmissible evidence offered to explain or supplement the terms of a written agreement. Subdivision (c) makes clear that the parol evidence rule does not make inadmissible evidence of course of dealing, usage of trade, and course of performance to explain or supplement the terms of a writing stating the agreement of the parties, in order that the true understanding of the parties as to the agreement may be reached. Such writings are to be read on the assumption that the course of prior dealings between the parties and the usages of trade were taken for granted when the document was phrased. Unless carefully negated, they have become an element of the meaning of the words used. Similarly, the course of actual performance by the parties is considered the best indication of what the parties intended the writing to mean. Subdivision (c) thus definitely rejects (1) the premise that the language used has the meaning attributable to such language by rules of construction existing in the law rather than the meaning which arises out of the context in which it was used and (2) the requirement that a condition precedent to the admissibility of the type of evidence specified in the subdivision is an original determination that the language used is ambiguous. Subdivision (c) is comparable to subdivision (a) of Commercial Code Section 2202 and codifies prior law. See discussions in 1 California Commercial Law งง 7.39-7.41, at 335-37 (Cal. Cont. Ed. Bar 1966); 1 B. Witkin, Summary of California Law Contracts งง 527, 534, at 449-50, 455-56 (8th ed. 1973). It is expected that the courts will look to the definitions in Commercial Code Sections 1205 and 2208 for guidance in interpreting the meaning of the terms "course of dealing," "usage of trade," and "course of performance."

    Section 1856 does not make inadmissible extrinsic evidence, other than that made inadmissible by subdivisions (a) and (b), offered to interpret or explain the meaning of the terms of a written agreement, regardless whether the writing is intended by the parties as a final, complete, and exclusive statement of those terms. See subdivision (g). Evidence offered to interpret or explain the meaning of the terms of a written agreement is subject to the normal rules of admissibility and construction of instruments, including the rule that the "test of admissibility of extrinsic evidence to explain the meaning of a written instrument is not whether it appears to the court to be plain and unambiguous on its face, but whether the offered evidence is relevant to prove a meaning to which the language of the instrument is reasonably susceptible." Pacific Gas & Elec. Co. v. G. W. Thomas Drayage & Rigging Co., 69 Cal.2d 33, 37, 442 P.2d 641, 644, 69 Cal. Rptr. 561, 564 (1968).[1978]

    See also the Recommendation Relating to Parol Evidence Rule, 14 Cal. L. Revision Comm'n Reports 143 (1978), which follows.

Recommendation Relating to Parol Evidence Rule

[This recommendation, together with the text of a proposed revised section 1856 of the Cal. Code Civ. Pro. and accompanying Commission Comment, was part of the Commission's 1977 transmittal to the Governor of California and to the California legislature urging the amendment of Cal. Code Civ. Pro. 1856. The legislature accepted the recommendation and enacted the statute in the form reprinted above, and the Governor signed it into law. The text of Cal. Code Civ. Pro. 1856 quoted and referred to below is the text of the statute as it existed prior to the legislature's amendment of the statute.]

Code of Civil Procedure Section 1856, which is the basic statutory formulation of the parol evidence rule, provides:

1856. When the terms of an agreement have been reduced to writing by the parties, it is to be considered as containing all those terms, and therefore there can be between the parties and their representatives, or successors in interest, no evidence of the terms of the agreement other than the contents of the writing, except in the following cases:

1. Where a mistake or imperfection of the writing is put in issue by the pleadings;

2. Where the validity of the agreement is the fact in dispute.

But this section does not exclude other evidence of the circumstances under which the agreement was made or to which it relates, as defined in Section 1860, or to explain an intrinsic ambiguity, or to establish illegality or fraud. The term agreement includes deeds and wills, as well as contracts between parties.

This rule serves a variety of purposes and policies, with the intent to encourage parties to reduce their agreements to writing. A written agreement minimizes the opportunity for perjury, avoids the risk of failing memories, enhances certainty in commercial dealings, and minimizes court time in resolving disputes.

The California codification of the parol evidence rule, enacted in 1872, has not proved adequate, however. In some situations, strict application of the rule would frustrate the clear intention of the parties. For this reason, the cases have continually eroded the rule, resulting in a maze of conflicting tests and exceptions. As the parol evidence rule exists in California today, it bears little resemblance to the statutory statement of the rule.

The existing California parol evidence rule may be summarized as follows. The rule makes inadmissible evidence of prior or contemporaneous oral or written agreements that would vary, add to, or contradict the terms of a written instrument that the parties intend to be integrated -- i.e., to supersede all other prior or contemporaneous negotiations and understandings and to constitute the final, complete, and exclusive embodiment of their agreement. The rule does not make inadmissible evidence of a collateral agreement that would supplement (but not contradict) the terms of a written instrument if it is shown that the written instrument was not intended by the parties to constitute an integrated agreement. The question of integration is one for the court rather then the jury. The rule does not make inadmissible extrinsic evidence offered to interpret or explain the meaning of a written instrument, whether or not integrated. The rule does not make inadmissible extrinsic evidence offered to prove that a written instrument is invalid or unenforceable because of mistake, fraud, lack of consideration, illegality, and the like.

The statute should at least accurately state the law. An inaccurate codification of the parol evidence rule is not only misleading, it also requires a search through the reports and treatises to find the law. The Law Revision Commission recommends that California's parol evidence rule statute be revised to conform to existing law.

Because the parol evidence provisions of the Uniform Commercial Code are substantially the same as existing California case law concerning the parol evidence rule, the Commission further recommends that the Uniform Commercial Code serve as the basis for the statutory restatement of the parol evidence rule. . . .

The leading California cases have drawn upon the Uniform Commercial Code provision in their formulation of the parol evidence rule. Use of the Uniform Commercial Code provision will assure a uniform parol evidence rule contracts and conveyances generally.

The Uniform Commercial Code parol evidence rule makes clear a few points which, under existing general contract law, are unclear. The Uniform Commercial Code precludes evidence of consistent additional terms to explain or supplement the writing if the court determines that the additional terms are such that, if agreed upon, they would certainly have been included in the writing. The Uniform Commercial Code rule does not preclude a contradictory written agreement that is contemporaneous with the writing. The Uniform Commercial Code makes explicit that course of dealing, usage of trade, and course of performance may be used both to supplement and explain the terms of the agreement. The Commission believes these would be beneficial clarifications of the general law and recommends their adoption.