Question

Answer the following, citing relevant legislation and case law in your answer: a) What is the parol evidence rule, and what is the court’s reasoning in applying the rule? (Maximum 100 words) b) List and explain the exceptions to the parol evidence rule. (Maximum 350 words)

Answer 1

A.The parol evidence rule governs the extent to which parties to a case may introduce into court evidence of a prior or contemporaneous agreement in order to modify, explain, or supplement the contract at issue. The rule excludes the admission of parol evidence. This means that when the parties to a contract have made and signed a completely integrated written contract, evidence of antecedent negotiations (called "parol evidence") will not be admissible for the purpose of varying or contradicting what is written into the contract.

The parol evidence rule is all about outside evidence and contracts. When a contract is “integrated” and finalized, a party to a contract is going to have a difficult time introducing outside evidence of other agreements or promises made. However, there are numerous exceptions that allow outside evidence to sometimes be introduced.

Some courts have found that even with the parol evidence rule, they will allow antecedent negotiations to be admissible as evidence if the evidence meets 3 components:

1.The agreement must be a collateral one.

2.The agreement must not contradict elements of the written contract.

3.The agreement must be something new that was not in the first contract.

4.The main rationale behind this component is that if the antecedent agreement was really agreed upon and liked by both parties, and if it is clearly connected, then it should have been included in the written contract.

It is also assessed by court that ,

Contract must be a “complete integration”

The parol evidence rule applies only when a contract is completely finalized, or “integrated.” This means an unambiguous execution of the written agreement that leaves no doubt that the parties intended it to be the final contract. A complete integration captures the parties’ full and exclusive agreement on a contract matter.

To determine when a contract has become integrated, courts will look at the circumstances to see whether the parties wanted the written agreement to be a final and complete agreement. This includes the provisions of the contract.

B.Here is the list of the important exceptions under which evidence normally excluded by the parol evidence rule can be admitted:

1. To resolve ambiguities in the contract or to otherwise assist in interpreting a term of the contract.
2. To show that a term in the contract is a mistake.
3. To show that fraud, duress, unconscionable behavior, or tortious interference with contract occurred.
4. To show that consideration was never paid.
5. To identify the parties or subject matter of the contract.
6. To modify the contract after its has been signed by all parties, if the contract explicitly allows for that.
7. To show a condition that had to occur before contract performance was due.
8. To show that an implied term of custom or trade usage or past dealings is part of a contract even if not in a written agreement.
9. If the evidence is incorporated into the contract by reference to the evidence in the contract itself.

Some other exceptions are as follows :

1. Defects in the formation of the contract (such as fraud, duress, mistake or illegality).
2. The parties’ intent regarding ambiguous terms in the contract.
3. Problems with the consideration (e.g., the consideration was never paid).
4. A prior valid agreement that is incorrectly reflected in the written instrument in question.
5. A related agreement, if it does not contradict or change the main contract.
6. A condition that had to occur before contract performance was due.
7. Subsequent modification of the contract.