Colliers, Dow & Condon, Inc. v. Schwartz
77 Conn. App. 462, 2003 Conn. App. LEXIS 266, 823 A.2d 438 (2003)
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Rule of Law:
The parol evidence rule prohibits the admission of extrinsic evidence of prior or contemporaneous oral agreements to contradict the clear and unambiguous terms of a valid, written contract, unless an exception such as fraud or mistake is specifically pleaded as an affirmative defense.
Facts:
- Colliers, Dow and Condon, Inc. ('Colliers'), a real estate brokerage, and K.F. Associates, LLP ('K.F. Associates'), a property owner managed by Leonard J. Schwartz, had a prior business relationship.
- In 1995, the parties entered into an 'Exclusive Right To Sell/Exchange Agreement' for a commercial property owned by K.F. Associates.
- In 1997, the parties signed a new agreement for the same property titled 'Exclusive Right to Sell/Exchange/Lease Agreement', which explicitly stated a commission would be earned upon a sale or lease and listed a specific lease rental price.
- At Schwartz's request, a Colliers representative, John Tully, approached the property's main tenant, Imagineers, about purchasing the property.
- Imagineers rejected the purchase proposal and instead negotiated directly with Schwartz to renew its lease.
- On August 26, 1998, during the term of the 1997 exclusive agreement, Schwartz and Imagineers signed a new five-year lease agreement.
- Colliers sent K.F. Associates an invoice for a 5% commission based on the new lease, which Schwartz refused to pay.
Procedural Posture:
- Colliers, Dow and Condon, Inc. filed a breach of contract action against K.F. Associates, LLP and Leonard J. Schwartz in the Connecticut trial court.
- The defendants filed an answer denying a breach and asserting a special defense that the contract did not comply with statutory requirements.
- At trial, the court admitted parol evidence from Schwartz regarding his oral understanding of the contract with Colliers' representative.
- The trial court rendered judgment in favor of the defendants, finding that there was no meeting of the minds regarding a commission for leasing the property.
- The plaintiff, Colliers, Dow and Condon, Inc., appealed the trial court's judgment to the Appellate Court of Connecticut.
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Issue:
Does the parol evidence rule prohibit a court from considering oral testimony that contradicts an unambiguous, express term in a written contract when fraud or mistake has not been pleaded as an affirmative defense?
Opinions:
Majority - West, J.
Yes. The parol evidence rule prohibits using oral testimony to contradict a clear term in a written contract when exceptions like fraud or mistake are not properly pleaded. The court reasoned that the parol evidence rule is a substantive rule of contract law, not merely a rule of evidence, which presumes that a complete and unambiguous written agreement embodies the parties' entire understanding. The trial court erred by admitting Schwartz's testimony that Tully had orally assured him the agreement was only for a sale, as this testimony directly contradicted the contract's explicit and unambiguous terms including the word 'Lease' and a specified rental price. While exceptions to the parol evidence rule exist for fraud or mistake, these must be raised as affirmative defenses in the pleadings, which the defendants failed to do. Furthermore, because the agreement granted Colliers the exclusive right to lease the property, Colliers earned its commission when the owner entered into a lease during the contract period, regardless of who negotiated the final lease agreement. The owner's refusal to pay constituted a breach of contract.
Analysis:
This case serves as a strong reaffirmation of the 'hard' application of the parol evidence rule, prioritizing the text of an unambiguous, integrated contract over extrinsic oral statements. It underscores that the rule is a substantive principle of contract law designed to provide certainty and finality to written agreements. The decision also provides a critical procedural lesson: a party wishing to invoke exceptions to the parol evidence rule, such as fraudulent inducement, must specifically plead them as affirmative defenses. Finally, the case reinforces the legal power of 'exclusive right to sell/lease' brokerage agreements, clarifying that a commission is due if a transaction occurs during the contract term, even if the owner completes the negotiation directly.
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