What Is The Parol Evidence Rule?

The parol evidence rule is a fundamental principle in contract law that prevents parties from using outside evidence to contradict or modify the terms of a written contract. When you sign a written agreement intended to be the complete and final expression of your deal, you generally cannot later introduce evidence of prior discussions, negotiations, or side agreements that contradict what’s written. Understanding this rule is crucial for anyone entering contracts and for those involved in contract disputes.

The parol evidence rule states that when parties have a written contract intended to be complete and final, evidence of prior or contemporaneous oral or written agreements cannot be used to contradict, vary, or add to the contract’s terms.

“Parol” means oral, though the rule applies to both oral statements and prior written documents that aren’t part of the final contract.

The logic: If you took the time to write down your agreement and sign it, the written document should represent your complete deal. Allowing parties to later claim “but we also agreed to this other thing verbally” would undermine the certainty and reliability of written contracts.

The parol evidence rule only applies in specific circumstances.

A written contract must exist that was signed by the parties and intended to be a binding agreement.

The contract must be complete and final meaning parties intended it as the complete expression of their agreement, often indicated by an “entire agreement” or “integration” clause.

The evidence must be prior or contemporaneous such as negotiations before signing, verbal discussions during contract formation, or earlier written drafts. Evidence of events after signing is not covered by the rule.

The evidence must contradict or add to the written terms by changing what the contract says, adding terms not in the contract, or contradicting explicit provisions.

Prior negotiations and discussions about what the contract would say, promises made during negotiations, or draft versions with different terms.

Side agreements made verbally before or at the time of signing that weren’t included in the written contract.

Verbal modifications to written terms made before or at signing.

Representations about what the contract means or what it will accomplish if they contradict the written language.

The parol evidence rule has significant exceptions allowing outside evidence in certain situations.

Explaining Ambiguity

If contract language is ambiguous or unclear, parol evidence can explain what the parties meant. The rule prevents contradicting the contract, not interpreting unclear terms.

Proving Fraud, Duress, or Mistake

You can introduce evidence that the contract was induced by fraud, signed under duress, or entered due to mutual mistake. The rule doesn’t protect fraudulent misrepresentations.

Showing a Condition Precedent

Evidence that the contract was subject to a condition that had to occur before it became effective is admissible. This shows the contract was not binding, not that it says something different.

Proving the Contract Is Void or Unenforceable

Evidence showing the contract is illegal, lacks consideration, or is otherwise void can be introduced.

Demonstrating Subsequent Modifications

The rule only applies to evidence from before or at the time of signing. Evidence of changes made after the contract was signed is admissible, though those modifications may need to comply with the contract’s amendment provisions.

Proving Collateral Agreements

Separate independent agreements on different subjects can be proven even if made around the same time. These must be truly independent, not just attempts to add terms to the main contract.

Most contracts include “entire agreement” or “integration” clauses stating the written document represents the complete agreement and supersedes all prior discussions.

Example clause: “This Agreement constitutes the entire agreement between the parties and supersedes all prior negotiations, representations, and agreements, whether written or oral.”

These clauses strengthen the parol evidence rule’s application by making clear the parties intended the written document to be complete and final. They make it very difficult to introduce outside evidence.

However, integration clauses don’t prevent evidence of fraud, duress, mistake, or other exceptions. They can’t protect illegal or fraudulent contracts.

Everything in Writing

The parol evidence rule means anything important to your deal must be in the written contract. Verbal promises or side agreements not included in the final document are generally unenforceable.

Read Before Signing

Since you generally cannot rely on verbal assurances contradicting the written terms, read contracts carefully before signing. What’s written controls, not what was said.

Document All Terms

If something matters to you, insist it’s written in the contract.

If you agree to change the contract after signing, document amendments in writing signed by both parties. Many contracts require written amendments.

Courts follow a process when the parol evidence rule is raised.

Determine if a final written contract exists intended to be complete and binding.

Assess what the external evidence would show: does it contradict, add to, or explain the contract?

Check if any exceptions apply such as fraud, ambiguity, or subsequent modification.

If no exception applies, exclude the evidence and interpret the contract based solely on its written terms.

If an exception applies, allow the evidence and consider it in resolving the dispute.

Courts strictly enforce the rule to maintain the reliability of written contracts.

Contract dispute about what was agreed? Pinto Shekib LLP handles complex contract litigation. Contact us at 416.901.9984 or info@pintoshekib.ca.