It’s an unfortunate truth of business that sometimes even the most thorough of contracts ends up in a lawsuit between the parties. If you have entered into a construction contract with another business entity, and they later breach that contract, you might have to take them to court.
During that lawsuit, they might try to present evidence of some oral agreement or modification that contradicts the terms of your contract in order to get off the hook. That’s where the Parol Evidence Rule comes in.
What the Rule prevents
The Parol Evidence Rule forbids the inclusion of parol evidence – which is evidence of outside information or oral agreements that contradict the final written terms of a contract.
For example, let’s say you hire a subcontractor to install windows in a building. Through email, you initially negotiate for them to install thirty windows. Later, over the phone, you both settle on fifty windows.
You draft a contract outlining the agreement for the fifty windows, and both parties sign it. Then, the subcontractor only installs thirty windows. When you sue them for breach, they try to introduce as evidence the series of emails between you two where you had originally agreed to thirty windows.
Since the thirty windows didn’t make it into the final contract, and since that number directly contradicts a term that is in the contract – the fifty windows you ultimately agreed on – the Parol Evidence Rule will forbid that subcontractor from using that email exchange as evidence.
Exceptions to the Rule
There are times when parol evidence is admissible in court, even when it deals with information that is outside the scope of the contract in question.
Either one of you can present evidence of fraud or duress in the formation of the contract. You can also present evidence that clarifies ambiguous terms in the contract, as long as that evidence doesn’t specifically contradict the terms of the contract.
Either party can also present evidence of negotiations and modifications that happened after – but not before – you both signed the contract.
Contract law is a complex field, and breach of contract lawsuits can become quite complicated. It’s good to understand the importance of what you put into the final contract, and its effect on evidence the other party will be able to use against you in the event of a lawsuit.