12. Can the homeowner recover for the builder's nonperformance?

The parol evidence rule bars evidence of all prior or contemporaneous agreements that contradict a written agreement. Essentially, the law operates to exclude evidence intended to show that the parties had agreed to something different from what was included in the written agreement. If a court determines that a contract contains all of the terms regarding the parties' agreement, the parol evidence rule bars evidence of all prior or contemporaneous evidence that contradicts or modifies the written agreement. Courts often look to whether there is a merger clause as evidence that a written agreement is intended to be a completely integrated contract. Merger clauses, however, are not conclusive evidence that a writing is completely integrated. If the agreement is completely integrated, no outside evidence will be permitted to modify the terms of the agreement, even if the modification is in addition to an existing term, rather than a contradiction of the term. On the other hand, if a written agreement contains only partial information, or certain terms are missing, courts will allow certain extrinsic evidence to supplement or explain terms and provisions of the written agreement. The parol evidence rule, however, will still bar outside evidence of prior or contemporaneous agreements that contradict the written contract. In short, if a contract is partially integrated, prior consistent additional terms may be shown.

There are exceptions to the parol evidence rule when evidence is offered for the following purposes: to aid in the interpretation of existing terms; to show that a writing is or is not an integration; to establish that an integration is complete or partial; to establish subsequent agreements or modifications; to show that the terms were the product of illegality, fraud, duress, or mistake; and to show a written agreement is contingent on a condition precedent. When parties orally agree that a written contract is contingent on a condition precedent (the occurrence of an event or some other condition), the oral agreement may be introduced as evidence of the condition.

B is correct. Here, the homeowner cannot recover for the builder's nonperformance based on the oral condition to the contract. As discussed above, even if the written agreement at hand is intended as the final expression of the parties' agreement, the condition exception to the parol evidence rule permits the admission of extrinsic evidence to establish the oral condition to the parties' performance under the contract. In this case, the builder's acceptance of the contract was conditioned on his bid on another project being rejected. This condition was not written in the contract. However, evidence of the oral condition is admissible as an exception to the parol evidence rule. Because the builder's bid was accepted on the other project, the event (rejection of the other bid) on which the contract was conditioned, never occurred.

A is incorrect. In legal theory, an efficient breach is a voluntary breach of contract and payment of damages by a party who concludes they would incur greater economic loss by performing under the contract. Essentially, this principle supports a breach of contract where the breaching party finds it cheaper to pay damages than to perform under the contract. It is an economically efficient breach for the breaching party. Nevertheless, it is still a breach. In this case, the question is asking whether the homeowner can recover for the builder's nonperformance. Here, even an efficient breach on the part of the builder would justify recovery by the homeowner. The homeowner can't recover for the breach, not based on efficiency principles, but rather, based on the exception to the parol evidence rule for conditions precedent.

C is incorrect. An illusory promise, a promise that is indefinite or lacks mutuality, where only one side is bound to perform, is unenforceable. Here, however, there was an enforceable commitment by the builder to perform on the project if the other bid was rejected. The issue is not whether the contact in question is illusory but, rather, the question is whether evidence of the oral condition precedent is admissible to show there is no breach of contract because the buyer conditioned performance on the rejection of the other bid. In this case, the condition exception to the parol evidence rule permits the admission of extrinsic evidence to establish the oral condition to the parties' performance under the contract, which, because it was not satisfied, discharged the builder's duty to perform.

D is incorrect. As discussed above, the condition exception to the parol evidence rule permits the admission of extrinsic evidence to establish the parties' performance under the contract was conditioned upon the occurrence of an event (the rejection of the builder's bid on another project). Even though the condition was not written in the contract, evidence of the condition is still admissible pursuant to the condition exception to the parol evidence rule. When the builder's bid on the other project was accepted, his duty to perform on the contract at issue was discharged. In other words, because the builder's bid on the other project was accepted, the event on which the current contract was conditioned on, did not occur, and the builder will not be in breach of the contract.