Parol Evidence Rule
The parol evidence rule prevents a party from avoiding liability on a written contract by presenting evidence that the writing does not mean what it says. The reason for the rule is to give stability to written contracts and to prevent someone claiming that there were oral terms that never found their way into the written agreement. Parol evidence will be allowed when:
- the writing is incomplete;
- the writing is ambiguous;
- the writing is not a true statement of the agreement of the parties because of fraud,
- accident or mistake; or
- the existence, subsequent modification, or illegality of a contract is in question.
If the written contract is obviously incomplete or if the parties admit that it is incomplete, Courts will allow evidence as to what was orally agreed to, in addition to what was agreed upon in writing. If the terms of the contract are ambiguous, parol evidence will be allowed to explain the contract so as to make it not ambiguous. For example, if a written contract might have two different meanings, parol evidence may be admitted to clarify what the contract really means. However, the fact that the parties disagree as to the meaning of the contract does not mean that it is ambiguous.
A contract which looks complete on its face may have omitted a provision that should have been included. Parol evidence may be admitted to show that this provision was omitted due to a mistake or because of fraud of the party drawing up the contract. Parol evidence is, of course, admissible to prove fraud. For example, if the seller of property orally represented that the land was zoned to permit commercial use, and the land in fact was not zoned for commercial use, this evidence can be admitted in seeking to avoid the contract.