D wished to sell his farm. D also owned an ugly icehouse across the road, on land belonging to someone else.
P wanted to purchase the land but hated the icehouse. D orally promised and agreed, in consideration for the purchase of the farm by P, to remove the icehouse.
P bought the land and made improvements. D refuses to remove the icehouse.
Procedural History:
Lower court found for P, oral contract enforceable.
Appellate court affirmed, found for P, oral contract enforceable.
NY COA reversed, found for D, oral contract not enforceable.
Issues:
Can an oral agreement, collateral to a written agreement but not included in the written agreement, be enforced?
Holding/Rule:
For a court to enforce an oral agreement collateral to a written agreement but not included in the written agreement, the court must find that…
The agreement must in form be a collateral one.
It must not contradict express or implied provisions of the written contract.
It must be one that the parties would not ordinarily be expected to embody in the writing. (must not be so clearly connected with the principal transaction as to be part and parcel with it)
Reasoning:
The parol evidence rule serves a useful purpose and should not be abandoned.
The parol evidence rule does not affect a parol collateral contract distinct and independent of the written agreement.
Where, however, one agreement is entered into wholly or partly in consideration for the simultaneous agreement to enter into another, the transactions are bound together.
If one agreement is oral and the other written, court must decide if the bond is close enough to prevent proof of the oral agreement.
The contract showed a full and complete agreement, setting forth in detail the obligations of each party. If such an agreement were made about the icehouse, it would seem most natural that the inquirer would find it in the contract.
The promise to remove the icehouse is collateral in form, but it is closely related to the subject matter dealt with in the written agreement, so closely that it may not be proved.
Dissent:
The parol evidence rule is meant to stop fraud; both sides agree that this promise was made orally.
Though the contract is complete as relating to the conveyance of land does not show that it was intended to embody agreements in regard to a matter so loosely bound to the conveyance as the removal of an icehouse from land not conveyed.
