Verbal / Parol Evidence Rule
The so-called parol evidence rule relates to documents in writing. Parol evidence, in this context, means oral or verbal evidence. The rule excludes the consideration of most statements of intention in prior negotiations when finding the terms of a written agreement.
There are two aspects to the parol (verbal) evidence rule. One is a presumption of interpretation, that a written agreement is conclusive. Another aspect is that evidence contradicting the written agreement is inadmissible to add, vary, contradict or alter its terms.
The purpose of the rule is to promote certainty in relation to contracts. In some cases, the rule may cause injustice. Where the contract is embodied in a document, this will usually be conclusive or close to conclusive as to what is comprised in the contract and not.
The rule is to a large extent, a presumption.Otherwise expressed, the rule is a strong presumption, that when a contract is in expressed writing that it contains all the relevant terms.
There are a number of exceptions to the rule, the effect of which is to limit it to a significant extent. In accordance with ordinary principles of interpretation, the presumption may be displaced.
Not Intended as Entire Contract
An inconsistent oral agreement will not generally be allowed to contradict the contract. However, even if it is not apparent on the face of the written document, the court may find that the contract is not intended to be the entire document. In this case, further evidence will be admissible. Oral evidence will be allowed where the document patently does not incorporate the full terms.
The parol evidince rule applies when a written document is intended to comprise the entire contract. Where the parties did not intend a written document to be the entire agreement, the courts appear willing to admit oral or other evidence. The rule, in effect, is a strong presumption that the written document is intended to be the entire agreement.
The rule is applicable only if the written document is intended to embody the whole contract. In cases where the written agreement by its terms does not embody the contract, the admission of evidence to supplement it does not contradict the rule. In some cases, what appears to be an entire contract, will not be so.
Exceptions to Parol Evidence Rule
There are a number of reasonably well-established exceptions to the rule, which where applicable, cause the rule or presumption not to be applicable. There is no reason in principle, why the courts may not carve out further exceptions for cases in which the rule/presumption can be displaced.
It must be the case that the verbal or other terms introduced by oral evidence are sufficiently clear so as to have legal status. Moreover, they must usually be consistent with the written agreement. In this case, they may add to the agreement. They will not generally be allowed to contradict it.
No Contract / Several Contracts/ Rectification
Evidence is admissible to show that there is no contract or that there are a number of contracts. This is significant in the context of so-called collateral contracts. A collateral contract is a second contract, subsidiary to the main contract. The courts are willing to find, in appropriate cases, that the entry into the main contract is the consideration for the collateral contract.
The rule relates to the content/terms of the contract rather than its validity. The parol evidence rule does not apply to challenges to the validity of the contract. They do not come within the terms of the rule itself.
Further evidence may be given that issues of illegality, mistake, duress, misrepresentation or fraud negate the contract.
If the agreement is wrong and requires to be rectified/corrected, verbal evidence is allowed to correct the mistake.
Explaining Context / Interpretation I
Evidence may be allowed, not to prove the terms of the agreement, but to show the surrounding circumstances, so as to interpret the context of the transaction. Verbal and other proof can be offered in order to explain the circumstances in which the document was signed. This is particularly necessary and appropriate where the agreement is ambiguous and needs contextualisation.
External evidence may be required to explain what the contract is about. If there is a reference to particular matters, it may be necessary to obtain further evidence beyond the written documents, about these matters, in order to show what was referred to. Generally, evidence will be admitted to explain an ambiguity.
Parol evidence is more readily admissible where there is ambiguity regarding the meaning of the written agreement in the circumstances. In some cases, the verbal elements may be significant or necessary for an explanation and understanding of the contract in it surrounding circumstances.
Explaining Context / Interpretation II
External evidence may be allowed to assist in the interpretation of the agreement. However, if the agreement is entirely clear on its face, such evidence will not generally be permitted. This would come close to undermining the rule itself.
Verbal evidence may be allowed to explain the circumstances surrounding an agreement. In many cases, the context will not be apparent and the facts and circumstances to which the agreement applies, will not be self-evident.
In order to clarify its meaning and intent, it may be necessary to understand the factual context in which the contract is entered. In this case, the evidence does not add to, vary or contradict the written agreement, but rather explains it so that the parol evidence rule does not apply.
In some cases, custom may supplement the terms of the contract. It may apply to particular trades and businesses. Where there is a particular trade custom which is relevant to the circumstances, evidence will be allowed to bring the custom to the court’s attention. However, the custom may not overrule the contract itself and will not be admissible if it would do so.
Proving Price / Consideration/ Parties
Evidence is allowed to prove the price or consideration in a contract. If one party has agreed to take less than the full price, verbal evidence may be allowed.
Where the actual consideration differs from that stated in the written agreement, it is generally possible to prove it by verbal evidence. Similarly, where an apparent gift is a sale or vice-versa, evidence to the contrary may be admitted.
Where the party has contracted as an agent, it is permissible for him to give evidence of his undisclosed principal.
Collateral Contracts I
A collateral contract is one which stands side-by-side with the main agreement. Collateral contracts are commonly referred to side agreements or side letters. A collateral contract is generally subsidiary, relating to one or more particular aspects of the matter. A collateral contract must itself be a separate contract, with its own offer, acceptance, and consideration.
Where a person enters an agreement and at the same time a specific assurance is made, it may be possible to show that there is a collateral contract. The entry into the principal contract may be the consideration for the collateral contract. The collateral contract may relate to an aspect of the transaction which is not required to be in writing but is material
In principle, the collateral contract should not contradict the written agreement. However, in practice in some cases, the collateral agreement may have this effect. In some cases, the collateral contract may come close to avoiding the parol evidence rule.
The effect of finding a collateral contract may be to add, vary, or contradict an agreement thereby circumventing the parol evidence rule. The consideration for entering the main collateral contract is the entry of the main contract.
In some cases, collateral contracts have been allowed to overrule and exclusion or limitation clause, weighted in favour of the defendant. In other cases, it has been used to add terms to a contract for the sale of land, notwithstanding that they are verbal.
Collateral Contracts II
The courts are willing to find collateral contracts where for example, goods are sold are of foot of specific assurances, which contradict the written terms of the agreement, particularly s standard form agreement, proffered by the seller. The issue has arisen in the context of loan agreements where it is alleged that the bank’s officers have promised that the loan agreement is limited in some way.
The courts have been reluctant to accept such arguments, particularly where they are based on oral assertions. However, where there is some written evidence of a collateral agreement, the matter may be more readily proved.
Collateral contracts have been invoked to circumvent the requirements for writing in the Statute of Frauds. For example, there may be a contract for the sale of land with some additional element. A written memorandum must set out the terms of the sale of land. The courts may find a collateral contract in relation to other matters, which are not required to be evidenced in writing such as the sale of contents/ movables which may be the subject of ordinary contracts, which are not required to be proved in writing.
In the above cases, the collateral contract may include a verbal representation accompanying the written document, may have contractual effect, and vary the written document. In this case, the collateral contract comes very close to circumventing the parol evidence rule entirely.
The exceptions to the rule do not imply that the rule is meaningless and can be readily circumvented. Evidence of further terms required to complete the contract will only be admitted where it falls within an established exception, is clear and is intended to form part of the contract. The claimant who alleges them carries a high onus. The courts will not readily allow additional terms and condition unless the position is clear.
Verbal terms which might of themselves, be sufficient to form part of the contract if there was no writing, will not of themselves be sufficient to add to a written contract. There is a higher onus on the person who seeks to add to the contract.
References and Sources
Irish Textbooks and Casebooks
Clark, R. Contract Law in Ireland 8th Ed. (2016) Ch 5
Friel, R. The Law of Contract 2nd Ed, (2000)
McDermott, P. Contract Law (2001) 2nd Ed (2017) Ch 6
Enright, M. Principles of Irish Contract Law (2007)
Clark and Clarke Contract Cases and Materials 4th Ed (2008)
English Textbooks and Casebooks
Poole, J. Casebook on contract law. (2014) 12th edition
Stone and Devenney, The Modern Law of Contract 10th Ed (2015)
McKendrick, Contract Law 10th Ed (2013)
Chen-Wishart, Contract Law 5th Ed (2015)
Anson, Reynell, Beatson, J., Burrows, Cartwright, Anson’s law of contract. 29th Ed (2010)
Atiyah and Smith, Atiyah’s introduction to the law of contract. 6th Ed.
Chen-Wishart, M. (2015) Contract law. 5th Ed.
Cheshire, Fifoot and Furmstons, Furmstons and Fifoot Cheshire, Fifoot and Furmston’s law of contract. OUP.
Duxbury, Robert (2011) Contract law. 2nd Ed.
Halson, Roger (2012) Contract law. 2nd Ed.
Koffman & Macdonald’s Law of Contract. 8th Ed. (2014)
O’Sullivan, Hilliard, The law of contract. 6th Ed. (2014)
Peel, and Treitel, The law of contract. 13th Ed. (2011).
Poole, J.Casebook on contract law. 12th Ed. (2014).
Poole, J. Textbook on contract law. 12th Ed. (2014)
Richards, P Law of contract. 10th Ed. (2011)
Stone, R. The Modern law of Contract. 10th Ed. (2013)
Treitel, G. H. An outline of the law of contract. 6th Ed (2014).
Turner, C Unlocking contract law. 4th Ed. (2014).
Upex, R. V., Bennett, G Chuah, J, Davies, F. R. Davies on contract. 10th Ed. (2008).
Stone,Devenney, Text, Cases and Materials on Contract Law 3rd Ed (2014)
McKendrick, Contract Law Text, Cases and Materials 6th Ed (2014)
Stone, R, Devenney, J Cunnington, R Text, cases and materials on contract law. 3rd Ed (2014)
Burrows, A. S. A Casebook on Contract. 4th Ed.
Beale, H. G., Bishop, W. D. and Furmston, M. P. Contract: cases and materials. 5th ed. (2008)
Blackstone’s Statutes on Contract, Tort & Restitution 2017 (Blackstone’s Statute Series)
UK Practitioners Texts
Chitty on Contracts 32nd Edition, 2 Volumes & Supplement (2016)
The above are not necessarily the latest edition.