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​ THE EXISTENCE OF A WRITTEN CONSULTING AGREEMENT BETWEEN THE PARTIES RELATING TO SALES AND MARKETING DID NOT, PURSUANT TO THE PAROL EVIDENCE RULE, PRECLUDE EVIDENCE OF AN ALLEGED ORAL AGREEMENT BETWEEN THE SAME PARTIES RELATING TO THE FORMATION AND OWNERSHIP OF A BUSINESS (SECOND DEPT). ​

The Second Department, reversing (modifying) Supreme Court, determined the counterclaim for breach of an oral contract should not have been dismissed. The court explained when the parol evidence rule does not exclude evidence of an oral contract. Here there was a written consulting agreement for defendant’s marketing and sales services. The alleged oral agreement related to the formation and ownership of a company (ION):

… ” … [A] written agreement does not exclude proof of a parol collateral agreement made even between the same parties, where the written contract is not intended to embody the whole agreement and does not on its face purport to cover completely the subject-matter of the alleged collateral agreement” … . For a prior oral agreement to be enforceable, “(1) the agreement must in form be a collateral one; (2) it must not contradict express or implied provisions of the written contract; (3) it must be one that parties would not ordinarily be expected to embody in the writing; or put in another way, an inspection of the written contract, read in the light of surrounding circumstances must not indicate that the writing appears to contain the engagements of the parties, and to define the object and measure the extent of such engagement. Or again, it must not be so clearly connected with the principal transaction as to be part and parcel of it” … .

Here, the consulting agreement did not completely cover the same subject matter as the alleged oral agreement, as the alleged oral agreement related to the formation and ownership of ION and the consulting agreement only related to the compensation that Ovadia [defendant] would receive for performing certain marketing and sales services … . Further, the alleged oral agreement did not vary, alter, or supplement any terms of the consulting agreement, which did not address ownership interests in ION … . Moreover, it would not ordinarily be expected that the subject matter of the alleged oral agreement would be addressed in the consulting agreement … . Parizat v Meron, 2024 NY Slip Op 04776, Second Dept 10-2-24

Practice Point: Consult this decision for a clear explanation of the application of the parol evidence rule. Here evidence of an alleged oral contract between the parties was not precluded by the existence of a written consulting agreement because the two agreements covered different subjects and the terms did not conflict.

 

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