A Closer Look at the Parol Evidence Rule

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The parol evidence rule is a basic concept of law. It governs the legality and enforcement of a contract when prior information between the parties existed but was not made part of the contract. It is an important concept: it is through parol evidence that renegotiating or rewriting a contract is not required to incorporate prior evidence. This is possible if the final written contracted is agreed upon between the parties, and such prior evidence was not included.

The words parol means “oral.” It is a reference, in legal terms, to the existence of any written evidence such as notes, emails, memos and prior draft contracts that may exist but were not made part of the contract. The reason that the parol evidence rule is important, as we will see further on, is to ensure the validity of a written contract and prevent prior evidence, even if it contradicts the agreement, from making it void.

The Evolution of the Parol Evidence Rule

The parol evidence rule has been in existence as part of common law since before the 1200s. It helped reconcile the knowledge of those under Roman rule who knew how to read and write and those of Germanic tribes who were not versed in letters. The reliance on oral interpretation of agreements between parties came with conflict and potential misunderstandings. In about the 1300s, the advent of the seal reduced reliance on memory and differing opinions on what constituted the contractual relationship between parties. It formed a foundation for the parol evidence rule.

The Parol Evidence Rule and Contract Law

Setting forth the formal terms of a contract in writing removes misinterpretation. The legal concept has been formed and refined over centuries and upheld consistently in court. Clay v. Connecticut General Life Insurance Co. (C.C.A. 5th, 1934) is a great example. It involved the assignment of a mortgage from one party to another to remove the original borrower’s obligation from yet another party under which a final agreement existed. The court held that a successor agreement between two parties does not absolve the original party from its responsibility under the final agreement.

The parol evidence rule, however, is not without exception. There are at least seven exceptions to the rule that are treated as admissible, including fixing defects in the contract; addressing any ambiguities in a contract of adhesion (one that is drafted by one party and binds both parties to its terms); problems with the consideration, one of the five elements of a legally enforceable contract; including a prior contract deemed valid meant to be incorporated into the successor contract; any related agreement that does not stand in contradiction of the contract; allowance of a condition meant to be satisfied prior to the contract performance being due and agreed-upon modification of the contract.

The Significance of the Parol Evidence Rule

The existence of the parol evidence rule protects the integrity of a written contract. An agreement put into writing (notwithstanding any of the exceptions enumerated above) expresses the desires of the parties entering into the agreement and eliminates any contradictions that invalidate an otherwise valid contract.

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Arthur Christiansen is a freelance writer who normally concentrates on Personal Injury, Criminal Defense Law, Evidence, Contract Law, Banking and Financial Regulation.