The parol evidence rule is a substantive rule of contracts which prohibits the introduction of contradictory extraneous prior or contemporaneous agreements to a written, signed document. This type of rule is essential to the certainty provided by signed contracts, and business could hardly continue to function if any party was free to claim additional terms and seek modification at any time after the contract is signed. This rule means that a party that signed that contract cannot later claim that there exist prior oral, written, electronic or any other type of agreements or statements, which go against the written agreement in some way, and which were not memorialized into the writing. This rule, however, does not prohibit the introduction of evidence which is not inconsistent with the written contract, and does not contradict its terms. This simply means that evidence to show what a particular provision was actually intended to do/mean will be permitted, including statements, writings, etc.

Most agreements will contain what is known as a “merger” or “integration clause” which simply expressly states that no outside agreements, promises, or statements have been made other than what is memorialized within the four corners of the document. If an agreement does not contain a merger clause this will make it more difficult to prove merger of all prior agreements into the written contract, however, the presumption of merger exists upon signing, is made stronger by the existence of a merger/integration clause and a few other clauses, and in the final analysis a court will review the surrounding circumstances of the creation of the contract in determining whether or not an agreement is merged/integrated and to what extent.

Basically, the less relevant the existence of contradictory evidence is to the subject matter of the agreement, and if the subject was not addressed in the contract, the easier a time the court will have finding that the parol evidence rule prohibits the introduction of such extraneous contradictory evidence. If the evidence pertains to a highly relevant matter in the agreement, and is not addressed in the contract, or is incompletely/ambiguously addressed, chances are such evidence may be permitted to modify the contract. If the topic is fully and unambiguously addressed then it is likely that parol evidence rule will bar the introduction of extraneous evidence. Point of fact, all agreements drafted by this office will have a merger clause, and it is paramount that it be properly drafted and all encompassing.

There are a few exceptions to this rule, which will actually permit the introduction of evidence showing extraneous agreements: when a writing is incomplete or ambiguous; these are two sides of one coin. As previously mentioned, if there is an important point highly relevant to the subject matter of the agreement and it is not addressed in the agreement, or it is addressed but not fully covered as in the interpretation could go either way, chances are good that parol evidence will be permitted. Fraud, accident of mistake will also permit introduction of outside agreements because proving fraud simply will void any agreement. An accident or mutual mistake need to be proven and the standards are quite high, however, if proven to the requisite standard, a contract will be permitted to be modified. Mistake can be shown in that all parties had no meeting of the minds regarding some provision(s), or that an important provision was left out. If an agreement was subsequently modified or may have been illegal, evidence to show the reasons for modification or illegality may be permitted. Finally, if there is use of customary terms or trade terms which are words of art, meaning they mean specific things in some specific industry, outside of what most people accept their meaning to be, then evidence may be permitted to show what the terms are actually accepted to mean in that industry or what their customary usage is.