Legal Memorandum: Parol Evidence Rule

Issue: Under federal bankruptcy law as applied in Minnesota, does a Promissory Note extinguish all debt incurred prior to the execution of the Note if renewing a prior debt?

Area of Law: Bankruptcy & Creditors Rights
Keywords: The parol evidence rule; Conditional payment; Discharge of the prior obligation
Jurisdiction: Federal, Minnesota
Cited Cases: 147 Minn. 230; 180 N.W. 109; 223 Minn. 550; 316 N.W.2d 13; 67 Minn. 62; 664 N.W.2d 303; 208 N.W. 801; 27 N.W.2d 641; 49 N.W. 744
Cited Statutes: None
Date: 10/01/2012

“[W]hen parties reduce their agreement to writing, parol evidence is ordinarily inadmissible to vary, contradict, or alter the written agreement.” Hruska v. Chandler Assocs., Inc., 372 N.W.2d 709, 713 (Minn. 1985).  “The parol evidence rule ‘prohibits the admission of extrinsic evidence of prior or contemporaneous oral agreements, or prior written agreements, to explain the meaning of a contract when the parties have reduced their agreement to an unambiguous integrated writing.'”  Alpha Real Estate Co. v. Delta Dental Plan of Minn., 664 N.W.2d 303, 312 (Minn. 2003) (quoting Richard A. Lord, Williston on Contracts § 33:1 (4th ed. 1999)).  In other words, simply put, the parol evidence rule excludes evidence of prior or contemporaneous discussions that vary or contradict the plain terms of the agreement.  Material Movers, Inc. v. Hill, 316 N.W.2d 13, 17 (Minn. 1982).  Even if there was some discussion between the parties in this case to roll all prior obligations into the Note, it would be inadmissible to contradict the clear terms of the parties’ written agreement.    

Moreover, in Holden v. Farwell, Ozmun, Kirk & Co., 223 Minn. 550, 27 N.W.2d 641 (1947), the Minnesota Supreme Court explained that a note taken in renewal of a prior debt is presumed to have been accepted as a conditional payment only, and the burden is on the one who claims that it discharged and extinguished the original debt to prove an express or […]