Commercial Division Blog

Posted: November 10, 2013 / Categories Commercial, Contracts

Extrinsic Evidence of Meaning of Contract Term Not Considered

On October 30, 2013, the Second Department issued a decision in Outstanding Transport, Inc. v. Interagency Council of Mental Retardation and Developmental Disabilities, Inc., 2013 N.Y. Slip Op. 07020, illustrating the broad scope of New York's parol evidence rule.

In Outstanding Transport, the Second Department affirmed the trial court's refusal to consider extrinsic evidence of an oral agreement to clarify the interpretation of a word in a written contract, holding:

When parties set down their agreement in a clear, complete document, their writing should as a rule be enforced according to its terms. Evidence outside the four corners of the document as to what was really intended but unstated or misstated is generally inadmissible to add to or vary the writing. Thus, before looking to evidence of what was in the parties' minds, a court must give due weight to what was in their contract. A contract should be read as a whole to ensure that undue emphasis is not placed upon particular words and phrases. . . . [C]ourts may not by construction add or excise terms, nor distort the meaning of those used and thereby make a new contract for the parties under the guise of interpreting the writing.

Here, the plaintiff failed to show any ambiguity in the subject contract that would permit consideration of the proferred extrinsic evidence of an alleged oral agreement to clarify the meaning of the term "preference" as used in the contract. Moreover, the interpretation advanced by the plaintiff would result in an unreasonable result, which should be avoided.

(Internal quotations and citations omitted).

Among the reasons that contracting parties choose to have their contracts interpreted under New York law is that New York courts generally enforce them as written. As Outstanding Transport shows, parties who attempt to modify the terms of a written contract orally may not have that oral modification enforced.