A fully integrated contract with a merger clause generally bars extrinsic evidence of prior terms, but collateral agreements may still be admitted. Which statement is most accurate?

• A. Collateral agreements are always admissible.
• B. Collateral agreements may be admissible if they are separate and do not contradict the main contract.
• C. Collateral agreements are never admissible under a merger clause.
• D. Collateral agreements override the main contract.

Answer: (B)

The main idea here is the parol evidence rule and how merger clauses shape what extrinsic terms can be used. A fully integrated contract with a merger clause is meant to be the complete and exclusive statement of the agreed terms, so extrinsic terms that would modify it are typically barred. But collateral agreements—separate side promises that exist independently of the main contract and do not contradict its terms—may still be admitted. They’re allowed because they reflect a separate understanding, not an attempt to vary the written agreement. As long as the collateral agreement is truly independent and consistent with the main contract, it can be admitted to show that a separate agreement exists. If the collateral agreement would contradict or modify the main contract, it won’t be admissible. So the correct view is that collateral agreements may be admissible if they are separate and do not contradict the main contract.