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 fact that the person who attempts to contradict the written contract was not a party thereto, when such contract was entered into, is not sufficient of itself to show that he is such a stranger to the instrument that he can introduce extrinsic evidence to contradict it. A subsequent holder or assignee of a written contract is, of course, as much bound by the parol evidence rule as the original party thereto, under whom he claims, as far as the original contract, which has been assigned, is concerned.1 Since the adversary party to the original contract other than the assignor is not a party to the assignment, the assignee may show that the assignment was by way of security only, so as to avoid a provision in the original contract to the effect that it should be void in case of assignment.2
If a third person bases his claim upon a contract, and is seeking to enforce it,3 as where he is seeking to show that the written contract was made between the parties thereto for his benefit,4 the parol evidence rule applies. If A and B have dissolved a partnership under an agreement by which A is to pay certain specified claims, including one which is due to X, and X is suing upon such contract as a beneficiary thereunder, X can not introduce extrinsic evidence to contradict such contract and to show that the agreement between A and B was to pay him a compensation in addition to that specified in such contract.5 A second mortgagee who is suing upon a standard mortgage clause as a beneficiary thereunder, can not contradict the provisions of such clause by showing in an action at law that such provision was intended for his benefit as well as for the benefit of the first mortgagee, who is the beneficiary named therein.6 If A and B are partners, and A brings an action against B for the conversion of B's interest in certain leases, B can not contradict the provisions of such leases in order to show that they were of greater value than the provisions of such leases would indicate.7 An attorney who is bringing an action to enforce a lien under a contract of compromise between his client and the adversary party, can not contradict the written contract of settlement by showing that although it purports to be a settlement of his client's entire cause of action, it was a settlement of an undivided half interest in such cause of action.8 If A, a railway company, insures only its own liability for C's property which is in A's possession as warehouseman, and by the terms of the written contract between A and C, A is not liable for loss by fire, A can not, in an action against the insurance company, contradict such terms by showing that A had agreed to insure C's interest.9
30Mahaffey v. J. L. Rumbarger Lumber Co., 61 W. Va. 571, 8 L. R. A. (N. S.) 1263, 56 S. E. 893.
31 Mahaffey v. J. L. Rumbarger Lumber Co., 61 W. Va. 571, 8 L. R. A. (N. 8.) 1263, 56 S. E. 893.
See Sec. 2170.
1 Andrus v. Blazzard, 23 Utah 233, 54 L. R. A. 354. 63 Pac. 888.
2 Aetna Insurance Co. v. Smith, 117 Miss. 327, L. R. A. 1918D, 1158, 78 So. 289.
Such evidence would have been admissible as between the original parties See Sec. 2154.
3Sayre v. Burdick, 47 Minn. 367, 50 N. W. 245; Schneider v. Kirkpatrick, 80 Mo. App. 145; Muir v. Morris, 80
Or. 378, 157 Pac. 785 [ denying rehearing, Muir v. Morris, 80 Or. 378, 154 Pac. 117]; Union Machinery & Supply Co. v. Darnell, 89 Wash. 226, 154 Pac. 183.
4Schultz v.. Bank, 141 111. 116 33 Am. St. Rep. 290, 30 N. E. 346; kup-ferschmidt v. Agricultural Insurance Co., 80 N. J. L. 441, 34 L. R. A. (N.S.) 503, 78 Atl. 225; Muir v. Morris, 80 Or. 378, 157 Pac. 785 [denying rehearing, Muir v. Morris, 80 Or. 378, 154 Pac. 117] Traders' National Bank v. Water Power Co., 22 Wash. 467, 61 Pac. 152; Union Machinery & Supply Co. v. Darnell, 89 Wash. 226, 154 Pac. 183.