This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
The principle that the consideration may be shown has been extended to cases where an oral contract has been proved as a consideration for the written contract, or as the courts sometimes put it, as an inducement for the written contract.1 If a written contract is entered into as performance of an oral contract, evidence of the existence and terms of such oral contract is admissible.2 A written contract by which A agrees to collect claims for B in accordance with A's "system," does not prevent evidence of A's oral explanation to B of such system of collection as an inducement to such contract.3 On this theory an oral contract to advance money may be shown as an inducement for a written contract to gather, cure and deliver a crop of raisins at a certain price; and breach of the oral contract may discharge the written contract.4 A written contract for work may be shown to have been entered into in reliance upon an oral contract that the promisor should not be required to do work of a certain kind,5 at least if such oral contract does not contradict the terms of the written contract. In an action on a note an oral contract to enforce payment by exhausting security in the form of a conveyance of realty in trust before proceeding against the maker of the note, may be shown.6 The holding in this case rests on the theory that it is fraud to obtain a note under such an agreement and then enforce it literally. The parol evidence rule has a peculiar meaning in Pennsylvania, however,7 being at law substantially the same as in suits in equity for reformation.8 So an oral contract to give certain logs as security may be shown as inducement for a written contract of sale of such logs.9 So an oral contract by an owner of realty to put in a side track, may be shown as an inducement for a written contract to build.10 So in Pennsylvania, an oral contract giving vendee the right to countermand a written order may be shown.11 So if A becomes surety for B to C, an oral contract of agency may be shown as consideration for the written bond, no consideration being expressed.12 So where a contract for judgment and stay of execution until the next term of court was entered into, an oral agreement that all matters in litigation up to the date of the contract were included and that a rent for the future was agreed upon, may be shown.13 So under a deed an oral contract that the grantor should have the right to sow a crop of grain on the land conveyed may be shown.14 So an oral contract to bequeath a certain amount may be shown as consideration for a written release.15 So under a written contract to donate rent of a building to be used by a corporation to be formed, an oral contract that rent in arrears should be paid before the corporation was formed may be shown.16 Evidence of an oral contract by way of inducement must be clear.17 Many of the cases which rest on this principle may be explained on other theories. In some the written memorandum is incomplete. In others the consideration is recited as a fact. After eliminating these cases, however, there are a number left which really support the principle laid down. If these cases are correctly decided there is little left of the parol evidence rule. It does not apply to recitals of fact. If, further, it is held not to apply to contractual terms which form part of the consideration, it is hard to imagine any term of an oral contract to which it would apply. The principle seems contrary to that which forbids oral evidence of the consideration to vary contractual terms,18 or to add to a complete contract.19 If a contract which appears to be complete upon its face provides for different rates of payment for different classes of excavation, extrinsic evidence is inadmissible to show that the oral contract which was the inducement for the written contract contained a provision to the effect that the determination of the engineer of one of the parties as to the kind of excavation should be final.20 If a written contract for the sale of a chattel appears to be complete upon its face, an oral agreement can not be shown as an inducement for such written contract, to the effect that the seller agreed to keep such chattel in repair for a year.21 Under a contract by which A agrees to construct certain paving for a city, and by which A agrees to buy rock from the city, an oral contract can not be shown by which the city agreed to furnish to A all the rock that he should need.22
1 California. Langley v. Rodriguez, 122 Cal. 580, 68 Am. St. Rep. 70, 56 Pac. 406.
New Mexico. Locke v. Murdoch, 20 N. M. 522, L. R. A. 1917B, 267, 151 Pac. 298.
North Dakota. Erickson v. Wiper, 33 N. D. 193, 157 N. W. 592.
Oklahoma. Rex Petroleum Co. v. Black Panther Oil & Gas Co., - Okla. - , 166 Pac. 1083.
Pennsylvania. Ferguson v. Rafferty, 128 Pa. St. 337, 6 L. R. A. 33, 18 Atl. 484; Huckestein v. Kelly, etc., Co., 152 Pa. St. 631, 25 Atl. 747; Clinch Valley, etc., Co. v. Willing, 180 Pa. St. 165, 57 Am. St. Rep. 626, 36 Atl. 737; In re Sutch's Estate, 201 Pa. St. 305, 50 Atl. 943; Noel v. Kessler, 252 Pa. St. 244, 97 Atl. 446.
In Pennsylvania it is well settled "that parol evidence is admissible to show that at the execution of a written instrument a stipulation was entered into, a condition annexed, or a verbal promise made upon the faith of which the writing was executed, though it may vary materially the terms of the contract." Noel v. Kessler, 252 Pa. St. 244, 97 Atl. 446 [citing, Greenawalt v. Kohne, 85 Pa. St. 369, - Atl. - , and Machin v. Prudential Trust Co., 210 Pa. St. 253, 59 Atl. 1073].
For the Pennsylvania rule, see The Admissibility of Evidence to Establish Oral Contemporaneous Inducing Promises to Affect Written Instruments in Pennsylvania, by Stanley Folz, 43 American Law Register (N.S.), 601.
"This provision of our Code embodies the common-law rule upon the subject of written contracts, and while 'the execution of a contract in writing, whether the law requires it to be written or not, supersedes all of the oral negotiations or stipulations concerning its matter, which preceded or accompanied the execution of the instrument,' nevertheless, as contended by the appellant, there are exceptions to the rule, and one of the exceptions seems to be that agreements or representations made prior to the written contract under which the party was induced to sign the contract may be shown; in other words, where the parol contemporaneous agreement was the inducing and moving cause of the written contract, or where the parol agreement forms part of the consideration for a written contract, and where he executed the written contract upon the faith of the parol contract or representations, such evidence is admissible. Chapin v. Dobson, 78 N. Y. 74, 34 Am. Rep. 512; Thomas v. Loose, 114 Pa. 35, 6 Atl. 326; Dicken v. Morgan, 54 Iowa 684, 7 N. W. 145; Cull-mans v. Lindsay, 114 Pa. 166, 6 Atl. 332; Bannett v. Pratt, 37 Neb. 352, 55 N. W. 1050; Ayer v. R. W. Bell Mfg. Co., 147 Mass. 46, 16 N. E. 754; Davis v. Cochran, 71 Iowa 369, 32 N. W. 445, 9 Ency. Evid. 350; Ferguson v. Rafferty, 128 Pa. 337, 18 Atl. 484, 6 L. R. A. 33; Hines v. Willcox, 96 Tenn. 148, 33 S. W. 914, 34 L. R. A. 824, 832, 54 Am. St. Rep. 823; Walker v. France, 112 Pa. 203, 5 Atl. 208." De Rue v. Mcintosh, 26 S. D. 42, 127 N. W. 532 [ quoted in Erickson v. Wiper, 33 N. D. 193, 157 N. W. 5921.
2 Rex Petroleum Co. v. Black Panther Oil & Gas Co., - Okla. - , 166 Pac. 1083.
3 American Mercantile Exchange v. Blunt, 102 Me. 128, 120 Am. St. Rep. 463, 10 L. R. A. (N.S.) 414, 66 Atl. 212. See Sec. 2189.
4Langley v. Rodriguez, 122 Cal. 580, 68 Am. St. Rep. 70, 55 Pac. 406.
5 Noel v. Kessler, 252 Pa. St. 244, 97 Atl. 446.
6 Clinch Valley, etc., Co. v. Willing, 180 Pa. St. 165, 57 Am. St. Rep. 626, 36 Atl. 737.
7 See cases cited in notes 5 to 9 this section.
8 Thomas v. Loose, 114 Pa. St. 35, 6 Atl. 626.
9 Ferguson v. Rafferty, 128 Pa. St. 337, 6 L. R. A. 33, 18 Atl. 484.
10Huckestein v. Kelly, etc., Co., 152 Pa. St. 631, 25 Atl. 747.
11 Thomas v. Loose, 114 Pa. St. 35, 6 Atl. 626.
12 Singer Mfg. Co. v. Forsyth, 108 Ind. 334, 9 N. E. 372.
13Bonney v. Morrill, 57 Me. 368.
14 Breitenwiacher v. Clough, 111 Mich. 6, 66 Am. fit. Rep. 372, 69 N. W. 88 [distinguishing, Addams v. Watkins, 103 Mich. 431, 61 N. W. 774, as a contract for the reservation of a crop already growing, and hence inconsistent with the deed].
15Andrews v. Brewster. 124 N. Y. 433, 26 N. E. 1024.
16 Chase v. Creamery Co., 12 S. D. 529, 81 Pac. 951.
17In re Sutch's Estate, 201 Pa. St 305, 50 Atl. 943.
18 See Sec. 2166.
19See Sec. 2137 et seq.
20Sund v. Flagg & Standifer Co., 86 Or. 289. 168 Pac. 300.
21 MacAlman v. Gleason, 228 Mass. 454, 117 N. E. 795.