Restat 2d of Contracts, § 216

• Restatement of the Law, Second, Contracts
• Chapter 9- The Scope of Contractual Obligations
• Topic 3- Effect of Adoption of a Writing
• § 216 Consistent Additional Terms

(1)  Evidence of a consistent additional term is admissible to supplement an integrated agreement unless the court finds that the agreement was completely integrated.
(2)  An agreement is not completely integrated if the writing omits a consistent additional agreed term which is

(a)  agreed to for separate consideration, or

(b)  such a term as in the circumstances might naturally be omitted from the writing.

Comment:

a.  Relation to other rules.  Like § 215, this Section states an evidentiary consequence of § 213. It also limits the concept of a completely integrated agreement set forth in § 210. Compare Uniform Commercial Code § 2-202(b). Where the limitation is not applicable, the court must decide whether the agreement is completely integrated on the basis of all relevant evidence, including the evidence of consistent additional terms.

b.  Consistency.  Terms of prior agreements are superseded to the extent that they are inconsistent with an integrated agreement, and evidence of them is not admissible to contradict a term of the integration. See §§ 213, 215. The determination whether an alleged additional term is consistent or inconsistent with the integrated agreement requires interpretation of the writing in the light of all the circumstances, including the evidence of the additional term. For this purpose, the meaning of the writing includes not only the terms explicitly stated but also those fairly implied as part of the bargain of the parties in fact. It does not include a term supplied by a rule of law designed to fill gaps where the parties have not agreed otherwise, unless it can be inferred that the parties contracted with reference to the rule of law. There is no clear line between implications of fact and rules of law filling gaps; although fairly clear examples of each can be given, other cases will involve almost imperceptible shadings. See § 204.

Illustrations:

1. A check states no date of payment, but it is orally agreed that the check will be paid only after six months. The oral agreement contradicts the check. Under Uniform Commercial Code § 3-108 the check is payable on demand, and most competent adults in the United States have reason to know the rule.

2. A owes B two debts, and sends a check for an amount less than the amount of either. In the absence of any contrary manifestation of intention by either party, the rule of law would be that the check is applied to the debt which first matured. An agreement that the other debt is to be paid is not inconsistent with the check.

c.  Separate consideration.  Where there is a binding completely integratedagreement, even consistent additional terms are superseded if they are within the scope of the agreement. See § 213. A separate contract, not covered by the integrated agreement, is not superseded. The rule of Subsection (2)(a) goes further; it limits the scope of the integrated agreement by excluding a consistent additional term made for separate consideration even though the additional term and its consideration are part of the same contract. This rule may be regarded as a particular application of the rule of Subsection (2)(b).

Illustration:

3. A and B in an integrated writing promise to sell and buy a specific automobile. As part of the transaction they orally agree that B may keep the automobile in A's garage for one year, paying $ 15 a month. The oral agreement is not within the scope of the integration and is not superseded.

d.  Terms omitted naturally.  If it is claimed that a consistent additional term was omitted from an integrated agreement and the omission seems natural in the circumstances, it is not necessary to consider further the questions whether the agreement is completely integrated and whether the omitted term is within its scope, although factual questions may remain. This situation is especially likely to arise when the writing is in a standardized form which does not lend itself to the insertion of additional terms. Thus agreements collateral to a negotiable instrument if written on the instrument might destroy its negotiability or otherwise make it less acceptable to third parties; the instrument may not have space for the additional term. Leases and conveyances are also often in a standard form which leads naturally to the omission of terms which are not standard. These examples are not exclusive. Moreover, there is no rule or policy penalizing a party merely because his mode of agreement does not seem natural to others. Even though the omission does not seem natural, evidence of the consistent additional terms is admissible unless the court finds that the writing was intended as a complete and exclusive statement of the terms of the agreement. See § 210.

Illustrations:

4. A owes B $ 1,000. They agree orally that A will sell B Blackacre for $ 3,000 and that the $ 1,000 will be credited against the price, and then sign a written agreement, complete on its face, which does not mention the $ 1,000 debt or the credit. The written agreement is not completely integrated, and the oral agreement for a credit is admissible in evidence to supplement the written agreement.

5. A and B sign a written agreement, complete on its face, that A will sell B Blackacre for $ 3,000, conveyance and payment to be made within 60 days. It is claimed that B was about to render services for A and that the written agreement was signed on the oral understanding that B would be permitted to pay the price by rendering the services at $ 50 an hour. The oral understanding is admissible in evidence unless it is found that the written agreement was completely integrated.

6. A and B sign a standard form of written agreement for the sale of goods, complete on its face except that a blank for time and place of delivery is not filled in. It is claimed that the writing was signed on the oral understanding that delivery would be made within 30 days at the buyer's place of business. Under Uniform Commercial Code §§ 2-308 and 2-309, the goods would be deliverable, unless otherwise agreed, within a reasonable time at the seller's place of business. The written agreement is not completely integrated, and the oral understanding is admissible in evidence to supplement its terms.

7. A and B sign a written agreement complete on its face, for the sale of goods to be shipped by A from Chicago to New York. It is claimed that the written agreement was signed on the oral understanding that the shipment would be made by a specified route. Under Uniform Commercial Code §§ 2-311 and 2-504, unless otherwise agreed, A could properly ship by any reasonable route. The written agreement is not completely integrated, and the oral understanding is admissible in evidence to supplement its terms.

8. A and B orally agree that A shall work for B in specified employment for $ 3,000. B delivers to A an absolute written promise to pay $ 3,000 in six months. The terms of the oral agreement are admissible in evidence to supplement the written promise and to qualify B's duty to pay $ 3,000.

9. A and B sign a written agreement, complete on its face, for the sale of a specific machine by A to B. The writing describes the machine and warrants that it is new, but contains no other terms relevant to warranty. Warranties of title, conformity to the description, merchantability, or fitness for a particular purpose, arising under Uniform Commercial Code §§ 2-312 through 2-315, are not excluded. Whether an additional oral warranty of quality is superseded depends on whether the agreement is completely integrated.

e.  Written term excluding oral terms ("merger" clause).  Written agreements often contain clauses stating that there are no representations, promises or agreements between the parties except those found in the writing. Such a clause may negate the apparent authority of an agent to vary orally the written terms, and if agreed to is likely to conclude the issue whether the agreement is completely integrated. Consistent additional terms may then be excluded even though their omission would have been natural in the absence of such a clause. But such a clause does not control the question whether the writing was assented to as an integrated agreement, the scope of the writing if completely integrated, or the interpretation of the written terms.

This Section carries forward the substance of former § 240(1), revised to fit the revised terminology used in this Part, and to make clear that oral terms which are not "natural" are excluded only on a finding that the agreement is completely integrated. See 3 Corbin, Contracts § 583 (1960); 4 Williston, Contracts § 631 (3d ed. 1961).

Comment b.  That evidence of consistent additional terms may be admitted only if the agreement is not completely integrated, see Intermar, Inc. v. Atlantic Richfield Co., 364 F. Supp. 82, 98 (E.D. Pa. 1973). Illustrations 1 and 2 are based on Comment c to former § 240.

Comment c.  See Service Iron Foundry v. M.A. Bell Co., 2 Kan. App.2d 662, 588 P.2d 463 (1978), in which a sales agent was held to have made an independent warranty enforceable against it despite an (apparently) integrated agreement between the buyer and seller. In Hobbs Trailers v. J.T. Arnett Grain Co., 560 S.W.2d 85 (Tex. 1977), both the majority and the dissenters agreed that a collateral contract is not barred by an integrated one. The majority held, however, that the alleged collateral agreement contradicted the main contract, while the dissent argued that the two agreements could coexist separately. Neither the dissenter in Hobbs nor the court in Service Iron Foundry explained where the consideration for the collateral agreement came from. Contrast Traudt v. Nebraska Public Power Dist., 197 Neb. 765, 251 N.W.2d 148 (1977). Illustration 3 is based on Illustration 1 to former § 240.

Comment d.  For examples of courts' assessments of whether terms might naturally have been omitted from a writing, compare Lee v. Joseph E. Seagram & Sons, 552 F.2d 447 (2d Cir. 1977); and Lakeway Co. v. Leon Howard, Inc., 578 S.W.2d 163 (Tex. Civ. App. 1979) (both finding that the term might naturally have been omitted); with Pasquale Food Co. v. L & H Int'l Airmotive, Inc., 51 Ala. App. 127, 283 So.2d 438, cert. denied, 291 Ala. 795, 283 So.2d 448 (1973); and Traudt v. Nebraska Public Power Dist., 197 Neb. 765, 251 N.W.2d 148 (1977) (finding the contrary). Illustrations 4-9 are based on Illustrations 2-7 to former § 240, revised to fit the terminology of the revised text and to refer where appropriate to the Uniform Commercial Code. As to Illustration 6, see Cargill, Inc. v. Fickbohm, 252 N.W.2d 739 (Iowa 1977), citing this Illustration in Tentative Draft.

Comment e.  This is new. See 3 Corbin, Contracts § 578 (1960); Freeman v. Continental Gin Co., 381 F.2d 459 (5th Cir. 1967); Pasquale Food Co. v. L & H Int'l Airmotive, Inc., supra.

Digest System Key Numbers:

Evidence 417