Parol Evidence Rule: Everything You Need to Know
The parol evidence rule regulates how opposing sides in a court case can bring in evidence regarding a contract or agreement related to the agreement being challenged in the case. 3 min read
2. Merger Clause
3. Parol Evidence Rule Example
4. Admissible Evidence
The parol evidence rule regulates how opposing sides in a court case can bring in evidence regarding a contract or agreement related to the agreement being challenged in the case. This outside evidence can in some cases be used to expound upon, change, or add to the contract on trial.
What Is Parol Evidence?
Parol evidence is not admissible under the parol evidence rule. When two parties enter into a contract that is fully integrated, neither side is allowed to use any extemporaneous discussions, previous contracts or oral agreements, or anything else outside of the final written contract. These pieces of evidence, separate from the signed contract, are called parol evidence.
Sometimes the words parol and parole are confused. Parole is a time period after a person's prison sentence, once they are released on the grounds of good behavior.
The parol evidence rule is sometimes called the four corners rule. This refers to the fours corners of a piece of paper representing the constraints of a written contract. According to the parol evidence or four corners rule, the only evidence admissible in court is what is found between the four corners of the paper document or what is specifically written in the contract, and nothing else.
If two parties enter into a final agreement, they cannot try to add to or change the agreement based on information not included in the written document that they each signed. Merger clauses are a good way to ensure that a contract is indeed final and complete. It clearly states that both parties agree on everything written in the contract and the agreement is fully expressed.
By including a merger clause in the contract, both parties agree that even if they form a side agreement later that changes an aspect of the written contract, the written contract will hold up in court over the side agreement. If a signed contract states that one party will deliver goods to another on September 1, but the two parties later have a discussion and decide that the goods do not need to be delivered until September 5, that later date will not be considered valid in court, especially if the original contract contained a merger clause.
Parol Evidence Rule Example
Two individuals sign a written contract regarding the sale of a motorcycle. The written contract says that Andrew will pay individual Bob $5,000 for the motorcycle by February 1. Bob allows Andrew to ride off with the motorcycle on January 23 in good faith that Andrew will hold up his side of the contract.
February 1 comes and goes and Andrew has not contacted Bob or sent any form of payment to him. Weeks later, and still no sign of Andrew, Bob decides to sue Andrew for a breach of contract.
During the trial, Andrew argues that he sent Bob a message on February 1 saying that he wouldn't be able to pay him until April, and Bob responded in agreement. Because of the parol evidence rule, Andrew's argument holds no weight. Bob will likely win the lawsuit and Andrew will be forced to pay Bob what he owns him and possibly more.
The parol evidence rule holds all parties to the terms of the contract regardless of separate conversations or agreements. This encourages people and companies to take contract agreements seriously and carefully write them. It also prevents companies and individuals from trying to work around agreements or ignoring contract requirements.
There are some exceptions to the parol evidence rule. Many believe that if anything is in writing it holds value in court, but this isn't the case. If in the example given Andrew sent Bob an email about the change of date for payment, the email would still fall under the category of parol evidence. However, if that email was written as a contract and Andrew could show proof that he and Bob formed a new contract with the later date, the email would be allowed as evidence.
A few situations that do allow for the use of parol evidence in a case are:
- A need for clarification or explanation for people in the court due to an ambiguous contract
- To demonstrate the invalidity of the contract or reveal a mistake
- To demonstrate illegal practice surrounding the contract, like coercion
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