The provisions of the second article, that the unfilled

Sale-construc- sales contracts were tion of contract of-stipulation assigned "without as to conclusiveness of writing. any guaranty as to said contracts or sales," of the fifth article, that all sales contracts were delivered "without prejudice," and of the eighth article, that "this memorandum contains all the terms of the sale herein involved and . . . there is no warranty express or implied incident to the sale or other conditions not herein specifically stipulated" are none of them equivalent to a statement that the prior representations (assumed at the trial to have been untrue) were not an inducement to the making of the contract. The statement that the written contract contains all the terms and that there is no warranty not specifically set forth in it does not purport to exclude causes of action for fraud, if there was any.

Contracts-exclusion of cause of action for fraud.

It is perfectly true that the vendor did not agree to be responsible for anything not set forth in the writing and guaranteed nothing not specifically provided. But had the vendor agreed to other things or warranted other facts, that would only have meant that the vendee might have recovered damages for the breach or might have rescinded the contract upon the failure of the vendor to fulfill its promises. When the vendor says it does not warrant, it merely means that it asserts nothing to be true for which it will be responsible in these ways. The writing constitutes the agreement of the parties, and the vendee has no rights under it other than those given by its terms. It may have been induced to go into it by antecedent statements which have turned out to be incorrect, but if the promisor has agreed to nothing

C. C. A. 429, 244 Fed. at page 12; Callanan v. Keeseville, A. C. & L. C. R. Co. 199 N. Y. at page 268, 92 N. E. 747; Adams v. Gillig, 199 N. Y. at page 319, 32 L.R.A. (N.S.) 127, 92 N. E. 670, 20 Ann. Cas. 910. Professor Wigmore's explanation of the inapplicability of the parol evidence rule is that "it is impossible to suppose that the subject of fraud was intended .. to be covered, since by hypothesis the party upon whom the fraud is practiced does not know of it and therefore could not have had such an intent." Wigmore, Ev. 2d ed. § 2439.

4

Whether this is the explanation, or perhaps the more simple one, that the law will not allow a man to profit by his own wrong, is unnecessary to determine; but it seems clear that such clauses as are contained in the contract under consideration do not preclude a defense of fraud. As the fraud was assumed by the court, the defendant was not entitled to a direction of a verdict. The whole evidence bearing upon the question should have been taken, so that the court, with everything before it, could decide whether or not there was a question for the jury.

Because of the failure to do this, the judgment should be reversed, and a new trial granted.

Manton, Circuit Judge, dissents.

I. Introduction, 13.

II. Rule in general, 16.

c. Bonds, 78.

VI. Statutes, 146.

VII. Pleadings, 147.

VIII. Miscellaneous, 150.

I. Introduction.

In considering the present subject, attention may properly first be directed to a statement of the parol-evidence rule itself. "The execution of a contract in writing is deemed to supersede all the oral negotiations or stipulations concerning its terms and subject-matter which preceded or accompanied the execution of the instrument, in the absence of accident, fraud, or mistake of fact; and any representation made prior to, or contemporaneous with, the execution of the written contract, is held to be inadmissible to contradict, change, or add to the terms plainly incorporated into and made a part of the written contract." As is implied in this statement of the rule, an exception or modification arises in cases of fraud. While the exception to the rule existing in case a written contract is procured by fraud is almost as well established as the rule itself, so long as one deals in broad generalizations, yet, as will be observed from the number of decisions on the subject, including many of a comparatively recent date, much misunderstanding still prevails as to the scope and effect of the rule, as well as

110 R. C. L. pp. 1016, 1017.

of the exception indicated. In any case where fraud is involved the application of general rules is of special importance, because the tendency of the courts is naturally to attempt to adjust or adapt such rules to the particular situations, and, through equitable or practical considerations, to limit or extend the rules themselves. The law, in its application to the present subject, has aimed at the defeat of a fraudulent intent, by refusing to apply a technical rule which in ordinary cases has proved to be beneficial and of great importance.

It is the purpose of the annotation, while collecting the cases on the general propositions involved, to show, also, how these principles have been applied. It does not purport, however, to treat questions of substantive law arising in the various classes of cases considered, apart from the effect of the parol-evidence rule in its relation to fraud; and it should be clearly borne in mind that, while the concrete facts are often presented for the purpose of showing how the exception. herein considered to the parol-evidence rule has been applied, other cases often arise which do not consider this exception, but turn on other grounds, and are therefore not includ

ed herein, although on the facts they may be similar to those set out. For that reason, the annotation should not be relied on to show the proper conclusion on ultimate questions of law,-in other words, substantive questions arising on the particular facts; but the cases should be regarded as cited for the purpose of illustrating the rules under consideration. The annotation, in other words, deals primarily with principles, not with specific groups of cases; but, in order to illustrate the general rules and to render

2 As illustrative of those cases holding that the rule against contradicting or varying the terms of a written instrument by parol does not preclude parol evidence to show that a written instrument was being used in such a manner contrary to the oral agreement of the parties as would constitute a fraud on one of the parties thereto, see Minnesota Mut. Invest. Co. v. McGirr (1920; C. C. A. 8th) 263 Fed. 847; Brainerd v. Brainerd (1843) 15 Conn. 575; Feltz v. Walker (1881) 49 Conn. 93; Naden v. Christopher (1911) 62 Wash. 413, 113 Pac. 1116, in which the court says that the intent to make a fraudulent use of a document is as obnoxious to the principles of equity as fraud in its procurement, and holds that parol evidence is admissible to show that a clause in a deed giving the grantee the right to collect the rent from a certain lease of the premises was inserted on the express agreement that it would not be pleaded as a warranty; England v. Houser (1914) 178 Mo. App. 70, 163 S. W. 890, in which the decision is based on the ground that the failure to perform the contemporaneous verbal promise that the written contract would not be enforced is not such a fraud as would warrant application of the rule admitting parol evidence of fraud inducing the execution of a written contract.

Failure to make a distinction between these two classes of cases seems to account for the anomalous view taken in some of the Pennsylvania decisions. See notes 40, 41, infra.

3 While it is a general principle that a judicial record cannot be contradicted by parol evidence, it is an equally well-known principle that no instrument, record, or document is valid, or can exist, in the face of fraud or dis

the treatment of the subject of as much practical value as possible, applications of these principles have been liberally cited.

The annotation is concerned with cases of fraud in the inception of the contract, as distinguished from a socalled fraudulent use of a written contract valid in its inception. 2 As indicated by the title, the annotation deals with contractual obligations, and therefore cases on the question of the right to show that records, judicial or municipal, are fraudulent, 3 and cases

honesty. Havird V. Boise County (1890) 2 Idaho, 687, 24 Pac. 542.

As to judicial records, the court in Lowry v. McMillan (1848) 8 Pa. 157, 49 Am. Dec. 501, says: "A record is entitled to great sanctity in the law. But then it must be an honest record. It is in vain to talk of the danger of altering or explaining a record by parol; everything imbued with fraud must give way before credible sworn testimony." As to whether fraud or mistake in making up a record may be proved in a collateral proceeding, see also, for example, Morris v. Galbraith (1839) 8 Watts (Pa.) 166.

That the parol-evidence rule does not preclude a showing that, owing to fraud or mistake, a judgment entered by agreement of the parties to the suit does not express the real agreement, see, for example, Weir v. Carter (1914)

Tex. Civ. App., 169 S. W. 1113. Without stating specifically the ground for the decision, which it seems may be regarded as involving a fraudulent misrepresentation, the court in Doyle v. Overby (1898) 75 Ill. App. 634, held that, in view of the agreement which the plaintiff testified was made by her with the defendant, that the latter should redeem her land from threatened foreclosure proceedings, and his representation that to enable him to redeem it was necessary for her to give the note in question with power of attorney, evidence was admissible to show that the note was for more than the sum which she owcd the defendant, and that said sum owing by her to him was a much smaller amount, notwithstanding the fact that judgment had been entered on the note, and it was contended that the plaintiff should not be permitted to go behind the judgment.

See in this connection note 67, infra.

of criminal prosecutions, are beyond the scope of the annotation.

Somewhat related to the present subject, but not within the scope of the annotation, are cases on the question of the right to show by parol evidence the illegal, fraudulent, or fictitious nature of the transaction into which both parties have knowingly entered. " It should be observed that the parolevidence rule precludes the parties to

While ordinarily the action of a municipal board can only be shown by its records, this rule does not preclude a showing by parol evidence of fraud or improper motives controlling the conclusion stated in the record. See for example, Stubbs v. Aurora (1911) 160 Ill. App. 351.

It has been held, for example, that the rule prohibiting the admission of parol evidence to vary the terms of a written contract is inapplicable in a criminal prosecution where the contract is not the subject-matter of the controversy, but is one only of a series of evidentiary facts bearing upon the ultimate question of the crime, as in the trial of a charge of using the mails to defraud, on which parol evidence is offered to show that the defendant made representations to intended victims, inconsistent or conflicting with the terms of the contract which they executed. Preeman v. United States (1917) 156 C. C. A. 429, 244 Fed. 1 (petition for certiorari denied (1917) 245 U. S. 654, 62 L. ed. 533, 38 Sup. Ct. Rep. 12).

in

5 See, for example, Lyman v. Kimball (1926) 82 N. H. 232, 131 Atl. 690, in which it is said: "The rule which forbids the introduction of parol evidence to contradict, add to, or vary a written instrument, does not extend to evidence offered to show that the contract was made in furtherance of objects forbidden by statute, by common law, or by the general policy of the law. . . . The rule will not prevent a court, either of law or of equity, from looking through all disguises in order to detect fraud or illegality, and inquiring into the true nature of the transaction and the intent of the parties."

In Easy Term Loan Co. v. Silberman (1924) 100 N. J. L. 67, 125 Atl. 561, in which the court says that fraud or illegality in a contract is an exception to the general rule that parol testi

a writing from contradicting or varying its terms by parol or extrinsic evidence, and not third parties. Hence, cases involving the rights of third parties, as, whether a third party can contradict or vary a written contract by parol evidence showing that it was entered into for a fraudulent purpose, are not within the scope of the annotation. 7

The question as to what constitutes mony is inadmissible to vary or alter the terms of a written contract, the alleged fraud consisted in an attempt of the parties to circumvent the statute of that state with regard to the loaning of money in cerain amounts.

That parol evidence is admissible to show that a writing valid on its face is part of a fraudulent scheme, see, for example, Sherlock v. Bradley Polytechnic Institute (1924) 184 Wis. 425, 198 N. W. 756.

That a deed may be shown, as between the parties to it, to be a mere sham not intended to pass title, without violation of the parol-evidence rule, see, for example, Brantley v. Brantley (1912) Tex. Civ. App. 145 S. W. 1024.

That it may be shown by parol that, under arrangements with the plaintiff's agent, the written contract sued on was not intended to be binding upon the defendant, but was procured from him in order that it might be shown to other persons to induce them to sign similar contracts, notwithstanding the written instrument contained a provision that “no verbal conditions made by agents will be recognized; every condition must be specified on the face of this contract," see, by way of illustration, Southern Street R. Adv. Co. v. Metropole Shoe Mfg. Co. (1900) 91 Md. 61, 46 Atl. 513.

6 "The rule that parol testimony may not be given to contradict a written contract is applied only in suits between the parties to the instrument or their privies. Parties to a written instrument have made it the authentic memorial of their agreement, and for them it speaks the whole truth upon the subject-matter. It does not apply to third persons, who are not precluded from proving the truth, however contradictory to the written statements of others." 10 R. C. L. p. 1020. 7 It is a well-settled rule of law that, in all cases of fraud and simulation,