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.
An attempt is frequently made to avoid the application of the parol evidence rule by invoking the doctrine of estoppel, and to claim that the party who has made the oral promises upon which the adversary party has relied is estopped from denying the legal force and effect of such oral promises, even though the transaction has subsequently been reduced to the form of a written contract which appears upon its face to be complete and free from ambiguity and although the oral terms which it is sought to enforce were omitted from this written contract. It is evident that if this condition is well founded, the parol evidence rule has no standing in law. If this theory is correct the parties to a contract are estopped from setting up the parol evidence rule in the only case in which the parol evidence rule will have any legal effect. The answer to this contention is to be found in the nature of estoppel itself. Estoppel is based on representations of facts and not upon promises.1 Accordingly, where this view prevails, it is held that the doctrine of estoppel does not apply and that the parol evidence rule prevents the introduction of evidence of oral agreements prior to the written contract or contemporaneous therewith, which are merged in the written contract by the operation of the rules already laid down.2 If A and B enter into an oral contract, and in reducing such contract to writing, the writing does not express the true terms of the oral contract, relief is to be granted upon the theory of reformation, and not upon the theory of estoppel.3
7 Continental Gin Co. v. Stocker, 235 Fed. 1005.
8 Hill v. First National Bank, 129 Ark. 265, 195 S. W. 678.
1"By the express condition of the policy, the liability of the company was released upon the failure of the insured to pay the premium when it matured; and the plaintiff could not recover, unless the force of this condition could in some way be overcome. He sought to overcome it by showing that the agent, who induced him to apply for the policy, represented to him, in answer to suggestions that he might toot be informed when to pay the premiums, that the company would notify him in season to pay them, and that he need not give himself any uneasiness on that subject; that no such notification was given to him before the maturity of the second premium, and for that reason he did not pay it at the time required. This representation before the policy was issued, it was contended in the court below, and in this court, constituted an estoppel upon the company against insisting upon the forfeiture of the policy. But to this position there is an obvious and complete answer. All previous verbal arrangements were merged in the written agreement. The understanding of the parties as to the amount of the insurance, the conditions upon which it should be payable, and the premium to be paid, was there expressed, for the very purpose of avoiding any controversy or question respecting them. The entire engagement of the parties, with all the conditions upon which its fulfillment could be claimed, must be conclusively presumed to be there stated. If, by inadvertence or mistake, provisions were omitted, the parties could have had recourse for a correction of the agreement to a court of equity, which is competent to give all needful relief in such cases. But, until thus corrected, the policy must be taken as expressing the final understanding of the assured and of the insurance company. * * * The doctrine of estoppel is applied with respect to representations of a party, to prevent their operating as a fraud upon one who has been led to rely upon them. They would have that effect if a party who, by his statements as to matters of fact, or as to his intended abandonment of existing rights, had designedly induced another to change his conduct or alter his condition in reliance upon them, could be permitted to deny the truth of his statements, or enforce his rights against his declared intention of abandonment. But the doctrine has no place for application when the statement relates to rights depending upon contracts yet to be made, to which the person complaining is to be a party. He has it in his power in such cases to guard in advance against any consequences of a subsequent change of intention and conduct by the person with whom he is dealing. For compliance with arrangements respecting future transactions, parties must provide by stipulations in their agreement when reduced to writing. The doctrine carried to the extent for which the assured contends in this case would subvert the salutary rule, that the written contract must prevail over previous verbal arrangements, and open the door to all the evils which that rule was intended to prevent." Union Mutual Life Ins. Co. v. Moury, 96 U. S. 544 (546, 548), 24 L. ed. 674.
Estoppel is nevertheless regarded, in some jurisdictions, as rendering admissible extrinsic evidence of the true understanding of the parties, in violation of the true meaning of the parol evidence rule.4
See to the same effect, Connecticut Fire Ins. Co. v. Buchanan, 141 Fed. 877, 73 C. C. A. 111, 4 L. R. A. (N.S.) 758.
2 United States. Union Mutual Life Ins. Co. v. Moury, 96 U. S. 544, 24 L ed. 674; Northern Assurance Co. v. Grand View Building Association, 183 U. S. 308, 46 L. ed. 213; Connecticut Fire Ins. Co. v. Buchanan, 141 Fed. 877, 73 C. C. A. 111, 4 L. R. A. (N.S.) 758.
Illinois. White v. Walker, 31 111. 422.
Michigan. Faxton v. Faxton, 28 Mich. 159.
New Jersey. Dewees v. Manhattan Ins. Co., 35 N. J. L. 366; Franklin Fire Ins. Co. v. Martin, 40 N. J. L. 568, 29 Am. Rep. 271.
3 Aetna Ins. Co. v. Brannon, 99 Tex. 391, 2 L. R. A. (N.S.) 548, 89 S. W. 1057.
4 People's F. Ins. Association v. Goyne, 79 Ark. 315, 16 L. R. A. (N.S.) 1180, 96 S. W. 365: Andersonian Investment Co. v. Wade, - Wash. - , 184 Pac. 327.