Understanding the Parol Evidence Rule

Let’s say that you are in the process of negotiating a contract. You discuss it, get the contract, sign it, and you’re done. Except then there’s a problem: Something important that you discussed and agreed to, and which was supposed to be in the contract somehow didn’t make it into the agreement.

But you did agree to it, albeit, that was a verbal agreement before the contract was signed. Is that pre-contractual agreement enforceable?

The answer is generally no-but there are exceptions.

The Parol Evidence Rule

The parol evidence rule says that the contract you sign is the complete and total understanding of the parties. If there was some agreement that the parties had before the contract was signed, and it never made it into the contract, the law assumes that it was omitted purposely; that is, that the parties knew about that pre-contractual agreements, and voluntarily agreed to not include it, even if in reality, that’s not what happened.

Exceptions to the Rule

There are times when you can enforce pre-contractual agreements. The first instance is when there is some ambiguity within the contract, or an internal contradiction, and the pre contractual agreement is being used to clarify the ambiguity or confusion.

Internal confusion in a contract can happen when there are terms or definitions within the agreement that conflict, or when a word, phrase, or covenant within the contract, is just not written clearly enough.

Another time when precontractual agreements can be used as evidence, is if there is something at issue in the case that relates to the dealings of the parties before the contract was entered into. For example, fraud in the inducement relates to whether the parties were defrauded, and as a result of the fraud, which happened before the contract was signed, the party entered into the agreement.

Incomplete Agreements

External, precontractual agreements can also be used when a contract is incomplete, or when agreements that should have been included in the contract, or which were needed to make the contract complete, never made it into this agreement. For example, imagine a contract for services and the parties forgot to include the payment amount, or forgot to include a time frame for payment.

This can be vitally important, because when a writing is too incomplete, a party can argue that there never was a meeting of the minds, and thus, no enforceable agreement. The parol evidence rule can be used to try to “save” a contract that a party is seeking to have declared unenforceable, by saying that you did, in fact, agree on all the major terms of the agreement–those terms just never made it into the agreement.

There are only limited times when something you talked about before a contract was formed, can be enforced. That’s why it’s so important to make sure that the things you want in a  contract, end up in that contract.

We can help you enforce your business agreements. Call our West Palm Beach business litigation attorneys at Pike & Lustig today.

Sources:

jec.unm.edu/education/online-training/contract-law-tutorial/the-parol-evidence-rule

legal.thomsonreuters.com/blog/the-parol-evidence-rule/