holding that “the only fraud that could vitiate the contract is fraud that would invalidate the merger clause itself, i.e., fraud relating to the merger clause or fraud that invalidates the entire contract including the merger clause” (quoting 3 Corbin, Contracts, § 578)
How later courts described this case
- holding that “the only fraud that could vitiate the contract is fraud that would invalidate the merger clause itself, i.e., fraud relating to the merger clause or fraud that invalidates the entire contract including the merger clause” (quoting 3 Corbin, Contracts, § 578)
- holding that, subject to limited exceptions relating to the formation of the clause itself, “when the parties include an integration clause in their written contract, it is conclusive and parol evidence is not admissible to show that the agreement is not integrated”
- holding that “parol evidence of prior or contemporaneous agreements or negotiations is admissible on the threshold question whether a written contract is an integrated instrument that is a complete expression of the parties’ agreement”
- holding that parol evidence of a separate agreement providing that the hotel would have union employees at the time of the convention was not admissible, because the parties’ letter agreement included an express merger clause
Written by the judges who cited it.
The opinion
Holbrook, Jr., J.,
(dissenting). I respectfully dissent.
The event that precipitated this legal dispute was Carol Management’s sale of the resort to defendants, without informing plaintiff during contract negotiations that the resort was for sale or that a sale was pending, and defendants’ subsequent firing of the resort’s union staff, less than one month after the contract with plaintiff was negotiated and signed. The contract — drafted by Carol Management — included a standardized integration or merger clause, but was silent regarding plaintiff’s acknowledged requirement *512 that the resort employ a union-represented staff. Attempts to pigeonhole these unusual facts into established black-letter rules of contract law lead to harsh and unintended results. Hard cases do, indeed, make bad law. 1
The contract’s merger clause — “a merger of all proposals, negotiations and representations with reference to the subject matter and provisions” — appears plain and unambiguous. While it is often stated that courts may not create an ambiguity in a contract where none exists, and that parol evidence is generally not admissible to vary or contradict the terms of a written contract, Professor Corbin acknowledges that strict adherence to these rules can be problematic:
The fact that the [parol evidence] rule has been stated in such a definite and dogmatic form as a rule of admissibility is unfortunate. It has an air of authority and certainty that has grown with much repetition. Without doubt, it has deterred counsel from making an adequate analysis and research and from offering parol testimony that was admissible for many purposes. Without doubt, also it has caused a court to refuse to hear testimony that ought to have been heard. The mystery of the written word is still such that a paper document may close the door to a showing that it was never assented to as a complete integration.
No injustice is done by exclusion of the testimony if the written integration is in fact what the court assumes or decides that it is. . . .
The trouble is that the court’s assumption or decision as to the completeness and accuracy of the integration may be quite erroneous. The writing cannot prove its own completeness and accuracy. Even though it contains an *513 express statement to that effect, the assent of the parties thereto must still be proved. Proof of its completeness and accuracy, discharging all antecedent agreements, must be made in large part by the oral testimony of parties and other witnesses. The very testimony that the “parol evidence rule” is supposed to exclude is frequently, if not always, necessary before the court can determine that the parties have agreed upon the writing as a complete and accurate statement of terms. The evidence that the rule seems to exclude must sometimes be heard and weighed before it can be excluded by the rule. This is one reason why the working of this rule has been so inconsistent and unsatisfactory. This is why so many exceptions and limitations to the supposed rule of evidence have been recognized by various courts.
There is ample judicial authority showing that, in determining the issue of completeness of the integration in writing, evidence extrinsic to the writing itself is admissible. The oral admissions of the plaintiff that the agreement included matters not contained in the writing may be proved to show that it was not assented to as a complete integration, however complete it may look on its face. On this issue, parol testimony is certainly admissible to show the circumstances under which the agreement was made and the purposes for which the instrument was executed. [3 Corbin, Contracts, § 582, pp 447-451 (emphasis added).]
And, in § 583 of his treatise, Professor Corbin continues:
No written document can prove its own execution or that it was ever assented to as a complete integration, supplanting and discharging what preceded it. . . . There are plenty of decisions that additional terms and provisions can be proved by parol evidence, thereby showing that the written document in court is not a complete integration. This is true, even though it is clear that the additional terms form a part of one contractual transaction along with the writing. [3 Corbin on Contracts, § 583, pp 465-467.]
*514 Accord Stimac v Wissman, 342 Mich 20, 26-27 ; 69 NW2d 151 (1955) (extrinsic evidence was admissible regarding a collateral independent promise so as to give full effect to the intent of the contracting parties); Restatement Contracts, 2d, § 216, comment e, p 140 (observing that a merger “clause does not control the question of whether the writing was assented to as an integrated agreement”).
The fact that plaintiff’s representative read and signed the contract does not obviate the applicability of the principles outlined in Corbin, §§ 582 and 583. Indeed, Professor Corbin illustrates the principles of the section by analyzing the case of Int'l Milling Co v Hachmeister, Inc, 380 Pa 407; 110 A2d 186 (1955), in which the parties entered into a contract for the sale and purchase of flour. During negotiations, buyer insisted that each shipment of flour meet certain established specifications and that such a provision be included in the contract. Seller refused to put the provision in the contract, but agreed to write a confirmation letter to buyer tying in the required specifications. Buyer placed a written order, indicating that the flour must meet the required specifications. Seller sent to buyer a printed contract form, which contained none of the specifications, but did contain an express integration clause. Seller also sent a separate letter assuring delivery in accordance with the required specifications. Buyer signed the written contract form. When a subsequent shipment of flour failed to meet the specifications, buyer rejected it and canceled all other orders. The Pennsylvania Supreme Court held that extrinsic evidence of the parties’ negotiations and antecedent agreements was admissible with regard to the issue whether buyer had *515 assented to the printed contract form as a complete and accurate integration of the contract, notwithstanding its express provision to the contrary. Corbin, supra at 458. 2 Professor Corbin notes that the court’s decision was fully supported by § 582, and explained at p 459:
It appears that in the instant case the buyer’s evidence was very strong, so strong that it would be a travesty on justice to keep it from the jury. This is not because the express provision of integration was concealed from the buyer; he was familiar with the printed contract form and knew that the provision was in it and the specifications were not. The court rightly refuses to deprive him of the opportunity to prove that its statement was untrue.... Bear in mind, however, that throughout the chapter the author has warned against the acceptance of flimsy and implausible assertions by parties to what has turned out to be a losing contract.
Section 582 of Corbin, allowing admission of extrinsic evidence with regard to the threshold question whether in fact the parties mutually assented to the written document as a completely integrated contract, does not contradict, but rather dovetails with, § 578, on which the lead opinion relies. Indeed, in § 578, p 402, Professor Corbin hinges a finding of conclusiveness of an express integration clause on whether the written document was “mutually assented to.” Further, in language excerpted out of the lead opinion’s quotation of § 578, Professor Corbin observes:
*516 The fact that a written document contains one of these express provisions does not prove that the document itself was ever assented to or ever became operative as a contract. Neither does it exclude evidence that the document was not in fact assented to and therefore never became operative.
* * *
. . . [PJaper and ink possess no magic power to cause statements of fact to be true when they are actually untrue. Written admissions are evidential; but they are not conclusive. [Id. at 405, 407 (emphasis added).]
Thus, examination of the written document alone is insufficient to determine its completeness; extrinsic evidence that is neither flimsy nor implausible is admissible to establish whether the writing was in fact intended by the parties as a completely integrated contract. See Brady v Central Excavators, Inc, 316 Mich 594 ; 25 NW2d 630 (1947); In re Frost, 130 Mich App 556 , 562, n 1; 344 NW2d 331 (1983) (parol evidence admissible where it was clear from the face of the writing that the writing did not contain the complete agreement as assented to by the parties); Franklin v White, 493 NE2d 161, 166 (Ind, 1986) (“An integration clause is only some evidence of the parties’ intentions. The trial court should consider an integration clause along with all other relevant evidence on the question of integration.”); Sutton v Stacey’s Fuel Mart, Inc, 431 A2d 1319, 1322, n 3 (Me, 1981) (citing Restatement Contracts, 2d for the proposition that a “merger clause does not control the question of whether a writing was intended to be a completely integrated agreement”); Restatement Contracts, 2d, § 209, comment b, p 115 (“Written contracts . . . may include an explicit declaration that *517 there are no other agreements between the parties, but such a declaration may not be conclusive.”).
“The cardinal rule in the interpretation of contracts is to ascertain the intention of the parties. To this rule all others are subordinate.” McIntosh v Groomes, 227 Mich 215, 218 ; 198 NW 954 (1924). It is undisputed in this case that plaintiff’s decision to hold its convention at the resort was predicated on the understanding of the representatives for both defendants’ predecessor and plaintiff that the resort employed a unionized staff. Had plaintiff been made aware that the resort was for sale or that a sale was pending, I believe it is reasonable to assume that plaintiff’s representative would have insisted that such a clause be incorporated into the agreement. Courts should not require that contracting parties include provisions in their agreement contemplating every conceivable, but highly improbable, manner of breach. In my opinion, the circumstances surrounding execution of the contract, as well as the material change in circumstance that occurred when the resort was sold and the union staff fired, establishes as a matter of law that plaintiff did not assent to a completely integrated agreement. Corbin’s warning against the admission of “flimsy and implausible” evidence is not implicated here.
Accordingly, I would affirm the trial court’s order granting summary disposition in favor of plaintiff pursuant to MCR 2.116(C)(10). 3
Paraphrasing Justice Holmes’ statement, “Great cases, like hard cases, make bad law.” Northern Securities Co v United States, 193 US 197, 400-401 ; 24 S Ct 436 ; 48 L Ed 679 (1904).
“The presence of an integration clause cannot invest a writing with any greater sanctity than the writing merits where, as here, it assuredly does not fully express the essential elements of the parties’ undertakings.” Haehmeister, supra at 417.
Although not raised by either party, I believe a valid argument also could have been made that no contract existed between plaintiff and defendant, because the party with whom plaintiff negotiated the contract was Carol Management, not defendant. Gregory v Wendell, 40 Mich 432, 443 (1879) (“No man can be compelled against his will, to accept another contracting party in place of the one he has dealt with, even though a contract with such other party may be equally valuable, and in its results *518 exactly the same.”). Carol Management’s sale of the resort to defendant could be interpreted as either a repudiation of the contract or as an offer to plaintiff of a novation. See 4 Corbin, Contracts, § 867, pp 462-463; Harrington-Wiard Co v Blomstrom Mfg Co, 166 Mich 276, 286-288 ; 131 NW 559 (1911) (discussing elements of a novation). In either event, plaintiff would have been entitled to a refund of its deposit whether the contract was determined to be repudiated by Carol Management or canceled because of plaintiffs failure to assent to a novation.