Description of the legal term Parol Evidence Rule:
The Parol Evidence Rule is a principle within English contract law that serves as a barrier to the admission of extraneous evidence for the purpose of altering, contradicting, adding to, or subtracting from the terms of a written contract. Once parties to a contract have finalized their agreement and encapsulated the terms within a written document, this rule assumes that the writing represents the definitive memorialization of their understanding and intent.
Under this rule, when a contract is clear and unambiguous on its face, evidence of any prior or contemporaneous agreements that would change or contradict the contract’s terms is typically inadmissible in court. The rationale is that the parties intended the written contract to serve as the sole evidence of their agreement, effectively superseding any earlier negotiations or promises that are not reflected in the final document.
However, there are several exceptions to the rule. Courts may consider parol evidence if it serves to resolve ambiguities within the contract, if it is relevant to proving that the contract is void or voidable (due to fraud, mistake, duress, or lack of capacity, for instance), or if the dispute pertains to matters that were not intended to be part of the written agreement (collateral agreements). Additionally, if a contract terms are incomplete or subject to a condition precedent, extrinsic evidence may be admissible to prove these elements.
The rule pertains only to written contracts; oral agreements are generally subject to a different analysis. Furthermore, the rule is inapplicable if parties are seeking to reform a contract because of a mistake that is evident on the face of the document or known to both parties at the time of execution.
Legal context in which the term Parol Evidence Rule may be used:
A classic example of the application of the rule can be found in a real estate transaction. Consider a situation where buyers and sellers have executed a formal written contract for the sale of a property. The contract specifies the sale includes the main house and adjacent lot. After the contract is signed, the seller claims there was a prior verbal agreement that the sale would only include the main house, not the lot. The buyer, unaware of this alleged agreement, seeks to enforce the written contract as is. In this scenario, a British court would likely apply the principle and exclude any oral evidence the seller attempts to introduce that contradicts the clear terms of the written contract: the sale of both the house and the lot.
Another context might be the sale of a business, where a written contract specifies the purchase price, payment terms, and assets included in the sale. After the deal is completed, the buyer claims that there was a verbal agreement with the seller that certain key employees would remain with the company for a minimum of one year post-sale. If this was not stipulated in the written agreement, the buyer might find it difficult to rely on the alleged oral agreement to claim damages or seek enforcement if the employees leave, because a British court could invoke the rule to exclude evidence of this prior or contemporaneous oral agreement, unless it falls under a recognized exception such as a collateral contract.
The significance of this principle in British jurisprudence cannot be overstated. It provides certainty and clarity in commercial and legal transactions, ensuring that parties can rely on written agreements to reflect fully and finally their mutual undertakings. By discouraging reliance on undocumented agreements, it promotes contractual discipline and provides a degree of predictability in contract enforcement, which are cornerstones of commercial law.
