Hicks v. Bush
180 N.E.2d 425, 10 N.Y.2d 488, 225 N.Y.S.2d 34 (1962)
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Rule of Law:
Parol evidence is admissible to prove an oral condition precedent to the legal effectiveness of a written agreement, provided the condition does not contradict the express terms of that written agreement.
Facts:
- On July 10, 1956, Frederick Hicks and the members of Clinton G. Bush Company executed a written agreement to merge their corporate interests into a new holding company, Bush-Hicks Enterprises, Inc.
- The agreement required the parties to subscribe for shares in the new company by transferring stock from their existing companies.
- The written agreement stated that subscriptions were to be made within five days and that all obligations would be terminated if the new company did not accept the subscriptions within 25 days.
- The parties promptly made and accepted the subscriptions as required by the written agreement.
- Hicks transferred the stock of his corporations to the new entity as agreed.
- The members of the Bush Company did not transfer their stock, and the merger never occurred.
- The parties had an oral understanding that the entire agreement would not become effective until $672,500 in 'equity expansion funds' was procured.
- The required expansion capital was never raised.
Procedural Posture:
- Frederick Hicks (plaintiff) brought an action for specific performance and an accounting against the members of the Clinton G. Bush Company (defendants) in the New York trial court.
- The defendants asserted as an affirmative defense that the written agreement was executed upon an oral condition precedent that was never met.
- The trial court, over the plaintiff's objection, admitted evidence of the oral condition and rendered judgment in favor of the defendants.
- The plaintiff appealed, and the intermediate appellate court affirmed the trial court's judgment.
- The plaintiff, Hicks, was granted leave to appeal to the Court of Appeals of New York, the state's highest court.
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Issue:
Does the parol evidence rule bar the admission of evidence of an oral condition precedent that a written agreement would not become operative until certain funds were raised, where the written agreement is silent on that condition but contains other, different conditions?
Opinions:
Majority - Fuld, J.
No, the parol evidence rule does not bar the admission of this evidence. Parol testimony is admissible to prove a condition precedent to the legal effectiveness of a written agreement if the condition does not contradict the express terms of the writing. Here, the oral condition that the merger was contingent upon raising $672,500 does not contradict the written agreement; rather, it addresses a matter on which the document is silent. The written condition regarding the acceptance of stock subscriptions within 25 days can stand side-by-side with the oral condition precedent. The oral condition is simply a further, independent requirement that had to be satisfied before the entire written agreement became an operative contract. Since the funds were never raised, the condition was not met, and no binding contract ever came into existence.
Analysis:
This case solidifies a key exception to the parol evidence rule, clarifying that an oral condition for a contract's effectiveness is not 'contradictory' just because the written agreement contains other conditions. The decision allows parties to agree that a signed, written document will remain inert until an external event occurs, which is a practical reality in many business deals contingent on financing or other approvals. This ruling distinguishes between evidence that alters specific terms (inadmissible) and evidence that establishes a condition for the entire contract's existence (admissible, if not contradictory). It provides a more flexible, intent-focused approach to contract formation.
