Parol Evidence Rule

THE PAROL EVIDENCE RULE

Parol Evidence Rule: A substantive rule of contract law under which a court will not admit evidence of the parties’ prior negotiations, prior oral or written agreements, or contemporaneous oral agreements if that evidence contradicts or varies the terms of a fully integrated, unambiguous written contract.

• Integration: The extent to which a written contract represents the final and exclusive agreement of the parties.

• A particular term included in a written contract is integrated if the writing represents the parties’ final agreement on that term.

• A written contract is fully integrated if it constitutes the parties’ final agreement on all terms relating to the transaction.

• Ambiguity: A written contract is unambiguous if its terms are not susceptible to more than one reasonable, legal interpretation.

PAROL EVIDENCE RULE: EXCEPTIONS

There are certain statutory exceptions that apply to contracts under the UCC. In addition, courts have recognized numerous exceptions to the operation of the parol evidence rule. Among the better-established exceptions are the following:

• evidence of subsequent modification;
• evidence of mistake, fraud, or misrepresentation in the formation of the written contract;

• evidence which may resolve an ambiguity or fill in a missing term or condition in the written contract;

• evidence of prior dealing between the parties, usage of trade in the relevant locale or trade, and course of performance under the contract by the parties;

• evidence of an oral condition precedent to the written contract; and

• evidence of an obvious or gross clerical error.