An Evidence Refresher for Trial Lawyers: Contracts are not Hearsay

An Evidence Refresher for Trial Lawyers: Contracts are not Hearsay
Bankruptcy Attorney Houston Creditors

Henry Flores

Senior Counsel

Any lawyer who has spent enough time in evidentiary hearings or trials has seen this odd exchange:

Lawyer A:        Your honor, we offer Exhibit 10, the contract dated X, into evidence.

Lawyer B:        Objection.  Hearsay.

Judge:              Lawyer B – how do you respond?

Lawyer A:        It is a business record…or an admission by a party opponent…or…[nervous paper shuffling]

I have often witnessed this exchange, and I have drawn this objection from opponents at trial and in summary judgment briefing. If you are lucky (or unlucky) enough to watch an extended version of this type of discussion, the arguments can become quite creative, with each side probing the boundaries of what the lawyers remember about hearsay definitions, exclusions and exceptions.

Crafting a response to an odd hearsay objection in real-time can confound both inexperienced and seasoned trial lawyers.  The prepared lawyer, however, does not need to fumble through the rules of evidence searching for an answer – helpful federal and state case law provides the winning response.

In the Fifth Circuit, a very helpful case is Kepner-Tregoe, Inc., v. Leadership Software, Inc., 12 F.3d 527 (5th Cir. 1994).  In Kepner-Tregoe, the District Court entered a permanent injunction barring the defendant from distributing a computer program that infringed on copyrighted materials for which the plaintiff held an exclusive license pursuant to a 1972 agreement (the “1972 Agreement”) between the plaintiff and the defendant’s predecessor.  On appeal to the Fifth Circuit, the defendant presented multiple arguments challenging the District Court’s application of substantive copyright law and the District Court’s evidentiary rulings.

Among a number of evidentiary arguments on appeal, the defendant argued that the District Court improperly admitted the 1972 agreement into evidence over the defendant’s hearsay objection.  The Fifth Circuit described the issue this way:

Finally, [defendant] argues that the court abused its discretion by admitting the 1972 Agreement over [defendant’s] hearsay objection[.]…[Defendant] could have objected that no proper foundation had been laid for the admission of the Agreement, but it objected on the grounds of hearsay instead. Surprisingly, both [plaintiff] and the court were thrown by this objection: the district court ultimately admitted the Agreement, saying that it did not think that the document was being “offered for the truth of the matter stated.”

The Fifth Circuit rejected the defendant’s hearsay argument with language that needs little explanation:

The objection was—in fact —inapposite. “Signed instruments such as wills, contracts, and promissory notes are writings that have independent legal significance, and are nonhearsay.” A contract is a verbal act. It has legal reality independent of the truth of any statement contained in it. Under the objective theory of contracts, the fact that two parties signed a contract is enough to create legal rights, whatever the signatories might have been thinking when they signed it. The admission of a contract to prove the operative fact of that contract’s existence thus cannot be the subject of a valid hearsay objection. To introduce a contract, a party need only authenticate it. Thus in this case, [defendant’s] objection to the admission of the 1972 Licensing Agreement on the grounds of hearsay was inapt.

The key part of this passage is clear – to introduce a contract, will, promissory note or other document that creates legal rights, the introducing party is only required to authenticate the document.  The document is not hearsay at all, so there is no need to search for an exception to the hearsay rule.

Texas state court litigators will find Kepner-Tregoe helpful because the Fifth Circuit cited two helpful  opinions from the Texas appellate courts that serve as a good research starting point on this hearsay issue – Casey v. Western Oil & Gas, Inc., 611 S.W.2d 676 (Tex. Civ. App. – Eastland 1981) and Byrd Int’l of Dallas, Inc. v. Electronic Data Systems Corp., 629 S.W.2d 177 (Tex. App. – Dallas).

Over the years, I have made it a habit to include extra copies of Kepner-Tregoe in my research materials when I am going into an evidentiary hearing or a trial. On a few occasions, the ability to hand the Judge a copy of a crystal-clear hearsay opinion has been very useful in addressing an oddball objection.

ABOUT THE AUTHOR: Henry Flores is Senior Counsel at Rapp & Krock, PC in the Bankruptcy and Creditors Rights group.


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