Parol Evidence

Parol refers to verbal expressions or words. Verbal evidence, such as the testimony of a witness at trial.

In the context of contracts, deeds, wills, or other writings, parol evidence refers to extraneous evidence such as an oral agreement (a parol contract), or even a written agreement, that is not included in the relevant written document. The parol evidence rule is a principle that preserves the integrity of written documents or agreements by prohibiting the parties from attempting to alter the meaning of the written document through the use of prior and contemporaneous oral or written declarations that are not referenced in the document.

Terms of a contract are commonly proposed, discussed, and negotiated before they are included in the final contract. When the parties to the negotiations do put their agreement in writing and acknowledge that the statement is the complete and exclusive declaration of their agreement, they have integrated the contract. The parol evidence rule applies to integrated contracts and provides that when parties put their agreement in writing, all prior and contemporaneous oral or written agreements merge in the writing. Courts do not permit integrated contracts to be modified, altered, amended, or changed in any way by prior or contemporaneous agreements that contradict the terms of the written agreement.

The parol evidence rule applies to written contracts to safeguard the terms of the contract. The courts assume by the parol evidence rule that contracts contain the terms and provisions that the parties specifically intended and lack those provisions that the parties did not want.

The parol evidence rule does not apply to written integrated contracts in some instances. For example, clerical or typographical errors found in the written agreement may be changed because the incorrect term does not represent the true agreement between the parties. Courts will also not apply the parol evidence rule to prohibit contradictory evidence that shows that the contract was entered into under duress, mistake, Fraud, or Undue Influence. Finally, the parol evidence rule will not prevent evidence that shows the existence of a separate agreement between the parties.

The law of sales also involves numerous written and oral contracts to which the parol evidence rule may be applied. However, in sales the court may look to contemporaneous or prior agreements not to contradict a written agreement but to explain or supplement it. The court may examine such evidence based on the parties' course of dealing, usage of trade, course of conduct, or evidence of consistent additional terms. Parties' course of dealing refers to a situation where two parties have a history of working together and entering into numerous contracts with each other, and the court can look to that history to clarify or interpret their written expressions. Usage of trade refers to circumstances in which the parties are participants in a particular trade or industry that has established ways of doing business. The courts can examine those established and accepted methods within the industry to help explain a written agreement. Parties' course of conduct refers to the actions of the parties in carrying out the particular contract, such as if a party accepts without objection the continued performance of the other party. It is also permissible for a court to consider supplemental consistent evidence that would generally not be included in the written agreement as long as it does not contradict the terms of the original agreement.

Further readings

Mann, Richard A., and Barry S. Roberts. 2004. Essentials of Business Law and the Legal Environment. 8th ed. Columbus, Oh.: Thomson/South-Western West.

Cross-references

Integrated Agreement; Oral Contract; Sales Law.