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The Parol Evidence Rule

What is the Parol Evidence Rule?

In general, the parol evidence rule prevents the introduction of evidence of prior or contemporaneous negotiations and agreements that contradict, modify, or vary the contractual terms of a written contract when the written contract is intended to be a complete and final expression of the parties’ agreement. A merger clause strengthens the presumption that the written document is complete and final by expressly stating that the written document is the final and full expression of the parties’ agreement. Thus, even if the parties later agree that they had a conversation creating, for example, a “side agreement” that was not included in the original written contract, and the side agreement contradicts the written contract (e.g., by changing the delivery date or price of a purchase), the additional or different terms included in the side agreement may not be enforced by the court when there is a merger clause in the written contract.

There are some exceptions to the parol evidence rule. Evidence of the following is admissible:

1. Defects in the formation of the contract (such as fraud, duress, mistake or illegality).
2. The parties’ intent regarding ambiguous terms in the contract.
3. Problems with the consideration (e.g., the consideration was never paid).
4. A prior valid agreement that is incorrectly reflected in the written instrument in question.
5. A related agreement, if it does not contradict or change the main contract.
6. A condition that had to occur before contract performance was due.
7. Subsequent modification of the contract.