This Florida diversity case presents questions of basic contract law. Plaintiff-appellant Albert Brown filed suit against Financial Service Corporation, International (FSC), a Georgia corporation, alleging that it breached its contract to repurchase certain stock which had been issued to Brown while he was employed by the company's wholly owned subsidiary, Financial Service Corporation of America.1 FSC counterclaimed for the balance due on a promissory note held by it and executed by Brown in November 1968 shortly after he became employed by the company. Although we fundamentally disagree with the district court's reason for granting summary judgment to FSC on Brown's claim, we affirm that decision and also affirm the lower court's summary judgment award to FSC on its counterclaim.

The operative facts are undisputed. In November 1968 negotiations between FSC and Brown culminated in Brown's employment by the company as a senior vice president and director of its subsidiary, Financial Service Corporation of America. The compensation package arranged for Brown included a $40,000 a year salary plus bonuses, a new or used Cadillac, and, most significantly for our purposes, an agreement to sell Brown 4000 shares of FSC's non-publicly held stock at $5 a share.2 Brown began work in mid-November of 1968. In late May 1969 William Branch, FSC's assistant secretary and the person in charge of issuing the company's stock, wrote a letter to Brown concerning the 4000 shares of stock to be issued pursuant to the employment bargain. This letter summarized the ways in which the stock purchase could be financed, as well as describing the various steps necessary to finalize the transaction.3 Enclosed with this letter was the Stock Purchase Agreement which set forth the specific terms of the purchase. This document is the source of the present difficulties.

The controversial provision deals with the disposition of the stock when the purchaser ceases to work for the company. For ease of reference we will call this the repurchase provision, and it provides:

'When, for any reason, Representative's employment with the Company terminates, the Company shall have one year from the date of such termination to repurchase any shares sold under this agreement for their fair market value at the time of such repurchase, which fair market value shall be the price adopted for the Company's stock by the Board of Directors of the Company in the most recent meeting of the Board preceding the termination of Representative's employment at which such action was taken. This option to repurchase shall be exercised by the Company sending written notice of its intent to exercise to Representative at his last address as shown on the Company's records. Such notice shall specify the time, place, and manner in which the repurchase shall occur. Thereafter, at the time and place and in the manner so specified the Company shall make payment for the stock to be repurchased in cash or by check and Representative shall, immediately upon making of such payment, deliver to the Company valid title to said stock and all certificates evidencing said stock free of all claims, liens, and encumbrances of any nature whatever.'

In response to Branch's letter Brown called Branch sometime between May 29, 1969 and June 6, 1969, to discuss the stock purchase transaction. Although the content of this conversation is in dispute, all agree that it took place and that it precipitated a letter from Brown to Branch which accompanied the signed stock purchase agreement when it was returned, via the mails, to Branch's office in Atlanta. This cover letter, dated June 6, 1969, discussed several matters relating to the purchase,4 but the significant element at this point is the reference to the repurchase or termination of employment clause; Brown wrote as follows:

'I wanted also to confirm the discussion you and I had yesterday on the phone on questions that I had raised. Referring to the termination of employment clause in the stock purchase agreement, while it is stated that the company shall have one year to repurchase any shares, we agreed that the company would repurchase almost immediately after termination . . ..'

Branch received Brown's letter but took no further action other than to issue the 4000 shares of stock once the financing had been arranged.5

In the fall of 1969 the relationship between Brown and FSC began to deteriorate and it was agreed, on what appear to be rather amicable terms, that Brown's employment would end on January 15, 1970. For reasons not entirely clear and unnecessary to relate in order to resolve the present appeal, Brown and FSC encountered problems in settling up following his termination. Although FSC was at one time willing to repurchase the stock for $10 a share and hold the proceeds until a final determination was made of amounts allegedly owed to FSC by Brown, Brown would not agree to this offer. FSC subsequently decided that its financial condition was such that it would not repurchase the stock. Left with 4000 shares of apparently unmarketable stock, Brown filed suit in November 1970 seeking damages from FSC for the alleged breach of its contract to repurchase the stock.6 He also alleged that the company had failed to sell him the additional 100 shares mentioned in the employment agreement, thus reasoning that FSC was liable for the difference between the purchase price of this stock and the price due upon repurchase. In addition to denying liability FSC counterclaimed for $11,600, asserting that Brown was liable for this amount as the unpaid balance on a promissory note executed by Brown and held by FSC.

After the parties stipulated that the case was a proper one for summary judgment, the trial court granted FSC's motion in Brown's suit and in its counterclaim. The court decided that the parol evidence rule precluded it from considering anything other than the stock purchase agreement to determine whether FSC had a duty to repurchase Brown's stock. The court reasoned as follows:

'Upon reading and analyzing paragraph 3 (the repurchase clause) the Court is convinced that the company was not obligated to repurchase but merely possessed an option. There is no ambiguity in the stock purchase agreement; its terms are clear. The cover letter of June 6, 1969 and any conversations between Brown and Branch prior to (or) contemporary to the stock purchase agreement may not vary its terms. The parol evidence rule . . . precludes varying an unambiguous written agreement by evidence of a contemporaneous oral understanding . . ..'

Rejecting Brown's defense that he was not liable for the balance due on the note because FSC had breached the employment agreement of which the note was an integral part, the court held for FSC on its counterclaim.

The significant issue on appeal is, stated broadly, whether the trial court erred in holding that FSC did not have a duty to repurchase the 4000 shares of stock. Although we take an altogether different view of the case than did the trial court, we reach the same result regarding FSC's obligation to repurchase. Other issues raised concern FSC's asserted liability on the 1000 additional shares of stock and the propriety of the court's holding on the counterclaim. Because of our resolution of the repurchase issue against Brown, there is no need to consider his contention relative to the 1000 shares, and we affirm without further discussion the court's holding that Brown is liable on the promissory note.7

The flaw in the trial court's analysis is its implicit conclusion that the stock purchase agreement represented the complete agreement of the parties and that therefore Brown's cover letter had no legal significance according to the parol evidence rule. The parol evidence rule is a rule of the substantive law of contract, and its purpose is to preserve the sanctity of a written agreement once it is determined that the writing fully states the agreement of the parties. See South Florida Lumber Mills v. Breuchaud, 51 F.2d 490 (5th Cir., 1931), cert. den., 284 U.S. 659, 52 S. Ct. 37, 76 L. Ed. 558; Everglade Lumber Co. v. Nettleton Lumber Co., 111 Fla. 333, 149 So. 736 (1933); Sears v. James Talcott, Inc., 174 So. 2d 776 (Fla.App.1965). Of necessity then the first question is whether the writing fulfills this function so as to be an integration of the parties understanding. Carolina Metal Products Corp. v. Larson, 389 F.2d 490 (5th Cir., 1968); Florida Capital Corp. v. Robert J. Bissett Const. Inc., 167 So. 2d 595 (Fla.App.1964); see G. Grismore, Principles of the Law of Contracts, 94 (J. Murray Ed. 1965). To answer this question a court should consider the writing as well as the circumstances surrounding its execution, Florida Capital Corp. v. Robert J. Bissett Const. Inc., supra, at 599, and parol and extrinsic evidence may be used in making this determination. Carolina Metal Products Corp. v. Larson, supra, 389 F.2d, at 493. We hold that Brown's cover letter should have been considered as a part of the parties' agreement concerning the terms of the stock purchase. See Johnson v. Smith, 84 So. 2d 722 (Fla.1956); Holcomb v. Bardill, 214 So. 2d 522 (Fla.App.1968).

Without doubt a covering letter may constitute a part of the total agreement. Gateway Co., Inc. v. Charlotte Theaters, Inc., 297 F.2d 483 (1st Cir., 1961); see Johnson v. Smith, supra; Fraser v. Lewis, 187 So. 2d 684 (Fla.App.1966). Here the cover letter itself clearly establishes that its purpose was to summarize in writing the content of a telephonic conversation concerning the purchase agreement; the cover letter specifically discusses terms of the stock purchase agreement. Moreover, the letter not only accompanied but was a cover to the signed stock purchase agreement when it was returned to Branch's office in Atlanta, And finally, Branch realized that at least to some extent the letter modified the terms of the purchase agreement. In short, the existence of the cover letter and the circumstances surrounding the execution of the stock purchase agreement preclude the conclusion that it was intended by the parties as the final memorial, the integration, of their understanding concerning the terms of the stock sale. Consideration of the cover letter would not, therefore, violate the parol evidence rule because the cover letter was a part of the contract. For this reason it was erroneous for the trial court to reject the cover letter when determining the rights and liabilities of the parties under the purchase agreement.8

The decision that the parties' contract is embodied in both the cover letter and the stock purchase agreement does not, of course, end the matter. For now there are arguably inconsistent contractual provisions dealing with the same subject matter-- that is, the rights and duties of the parties on the purchaser's termination of employment. We agree with the trial court that the stock purchase agreement standing alone does not impose a duty on the company to repurchase Brown's stock. The problem is that the cover letter says 'we agree that the company would repurchase almost immediately after termination.' Interpreting these words in the manner urged by Brown would lead to the conclusion that this language means that the company had an obligation to repurchase the stock and that this repurchase must occur immediately after termination. Two duties are thus created: (1) the duty to repurchase; and (2) the duty to do so immediately after termination. Obviously this interpretation is in direct conflict with the interpretation of the agreement as giving the company an option to repurchase but imposing no affirmative duty.

There is, however, another interpretation which could be accorded to this language from the cover letter. Rather than treating this statement as creating two duties, it could be interpreted as imposing only a duty on the company to exercise its option immediately on termination. In the circumstances of this case it is this interpretation which we adopt as representing the intention of the parties at the time this contract was consummated.9 We reach this conclusion on the basis of the following analysis in which we apply several well established principles for the interpretation and construction of contracts.

The first principle is that in interpreting contractual language to determine the rights and obligations of the parties to the agreement the contract must be considered as a whole in an effort to give meaning to all of its provisions. See Union Central Life Ins. Co. v. Neuhoff, 157 Fla. 98, 24 So. 2d 906 (1946); Blackshear Mfg. Co. v. Fralick, 88 Fla. 589, 102 So. 753 (1925). See generally 3 Corbin on Contracts, 549 (1960). Florida courts have long recognized that 'if clauses in the instrument are repugnant to each other, they must be reconciled, if possible . . ..' McNair & Wade Land Co. v. Adams, 54 Fla. 550, 45 So. 492, 493 (1907). To interpret the language in Brown's letter as creating a duty in the company to repurchase his stock would render completely nugatory one of the crucial provisions of the document which he signed and returned to FSC. We would have to totally disregard the language in the purchase agreement conferring an option to the company to repurchase. By interpreting the disputed language in Brown's letter as going only to the time of repurchase rather than establishing such a duty, we afford meaning and significance to all parts of the contract. This interpretation also fulfills our duty to reconcile provisions which at first glance appear repugnant to each other.

The principle that conflicting provisions should be reconciled in order to give meaning to all parts of the contract might not warrant interpreting Brown's language as we have. Another established rule of contract interpretation, however, is that courts may look to subsequent action of the parties to determine the interpretation that they themselves placed on the contractual language. LaLow v. Codomo, 101 So. 2d 390 (Fla.1958). The conduct of both parties subsequent to Brown's termination leaves us convinced that neither FSC nor Brown believed that the company had an affirmative duty to repurchase his shares.

The voluminous record made on the parties' cross-motions for summary judgment is replete with correspondence from Brown to FSC and vice versa. A good portion of these communications deal directly with the disposition of Brown's stock. Understandably since Brown would have received $40,000 from the sale, he was anxious for this to occur so that he could retire the note10 negotiated to finance the purchase in the first place. But none of his many letters exhorting the company to hurry up and repurchase his stock speak in terms of an affirmative obligation on the part of FSC. Likewise, when FSC offered to repurchase and hold the proceeds until the final accounting was completed, the offer spoke in terms of FSC's right to repurchase instead of a duty to do so.11 Brown even mentioned in two letters to two different officers of FSC that he might hold the stock until the company went public. The extensive correspondence between Brown and FSC simply does not support the interpretation now sought by Brown. Considering the contract as a whole, the circumstances surrounding its execution, and the conduct of the parties subsequent thereto, our conclusion is that this contract does not impose a duty on FSC to repurchase the 4000 shares of stock issued to Brown.

The judgment of the district court is affirmed.