Parol Evidence. A 1965 bargaining agreement between employees and Wheelabrator Corp clearly stated that the company would pay the cost of health insurance for employees who had retired prior to 1959. Later bargaining agreements, the last of which

Question

expired in 1988 when the plant at which the employees worked was closed, also indicated that once employees reach the age of sixty-five, Wheelabrator would pay for their health insurance and that when they die, their spouses would continue to receive supplemental health benefits at the company's cost. Wheelabrator withdrew the health benefits of retired employees in 1988, when it closed its plant and the last agreement expired. Kenneth Bidlack and other retired employees sued the company to have their health benefits reinstated. The employees asserted that the agreements meant that they would be granted benefits for life. Wheelabrator contended that the agreements granted benefits only for years—during the duration of the agreements. The court was left to decide whether extrinsic evidence (including letters from the company to retirees indicating that the company would pay the cost of the health insurance throughout the retirees' lives) was admissible to clarify terms of the contract. Should the court allow the employees to introduce extrinsic evidence to justify their claim? Discuss fully.

Answer 1

Parol evidence
The court allowed the admission of extrinsic evidence. The court pointed out that extrinsic evidence is admissible to show that a written contract that looks clear is actually ambiguous, if there is "either contractual language on which to hang the label of ambiguous or some yawning void * * * that cries out for an implied term. Extrinsic evidence should not be used to add terms to a contract that is plausibly complete without them." The court explained that "[i]f therefore the collective bargaining agreements in this case were completely silent on the duration of health benefits for retired employees, then since * * * nothing in the structure of the agreements required that the duration be perpetual, we would not allow extrinsic evidence to show that those employees have a perpetual entitlement. But the agreements are not silent on the issue; they are merely vague."