The parol evidence rule is a substantive rule of law that, in certain situations, prevents the introduction of extrinsic evidence to modify or add terms to a contract or agreement in dispute. Ideally, a single contract or agreement is the complete and final expression of the agreement between or among the parties to the contract. In reality, contracts may be incomplete. In certain cases — known as exceptions to this rule — evidence outside the contract can be considered for a variety of reasons, including to correct mistakes in, clarify ambiguities in, or add terms to the contract. Extrinsic evidence that establishes defenses, like fraud and duress, as to whether there is even a valid contract at all, as well as agreements that are made after the contract in question, is not precluded by the rule — that type of extrinsic evidence may be considered.
General Contract Rules
When two individuals make a contract, the private promises contained within the document become legally enforceable. This means one party can sue the other for breaking the promise — legally referred to as breach of contract — and the court will impose monetary penalties if the court determines that the defendant in the case failed to fulfill his duties as required by the contract. When determining whether a contract was breached and what the appropriate damages are, the court looks at the terms of the written contract.
Parties to a contract may sometimes make modifications or changes to the contract. These changes may come in the form of oral addendum, which means the parties will verbally agree to change the contract. Under the parol evidence rule, however, oral contracts or verbal changes to a contract are not considered and cannot be introduced into evidence in a breach of contract case.
The parol evidence rule exists because the court believes that a written contract is the best representation of the parties' intentions when it comes to their agreement. In order for this rule to apply, however, certain conditions must be met, as determined by the court.
For the evidence rule to apply, the written contract must be a final writing. This means the court must believe that both parties to the contract intended it to be a final representation of their agreement, and not just a draft or a contract still under negotiation. It can be a final, complete integration — meaning it is the final embodiment of the total agreement between or among the parties, or it can be a final, partial integration — meaning it it's the final embodiment of part of the total agreement between or among the parties. If the contract is not the final expression of the parties' agreement, whether partial or complete, the parol evidence rule does not come into play and extrinsic evidence may be introduced.
Whether the contract is deemed a complete integration or partial integration affects whether and what types of evidence may be considered. If it is complete, then written or oral agreements that were made before or contemporaneous with the contract in dispute may not be introduced to contradict or supplement terms of the contract. The parol evidence rule does not preclude extrinsic evidence that would resolve ambiguities or correct clerical errors in the contract.
If the contract is determined to be a partial integration, then the parol evidence rule prohibits the consideration of extrinsic evidence — written or oral — that was made before the contract was formed if that evidence will contradict a contract term. The rule also precludes the consideration of oral agreements made at the same time as the contract. The rule does not prohibit, however, the consideration of extrinsic evidence — oral or written — that would supplement or add terms to the contract. As with complete integration, scrivner errors and ambiguities may be corrected or clarified with extrinsic evidence.