Contract interpretation—the parol evidence rule

The following Dispute Resolution practice note provides comprehensive and up to date legal information covering:

  • Contract interpretation—the parol evidence rule
  • Parol evidence rule—what is it?
  • Parol evidence rule—why does it exist?
  • Parol evidence rule—exceptions/limitations on its scope
  • Parole evidence exception—subsequent conduct
  • Parole evidence and entire agreement clauses

Contract interpretation—the parol evidence rule

In addition to the guiding principles on contract interpretation provided by Lord Hoffmann in ICS (see Practice Note: Contract interpretation—the guiding principles), further rules have been developed as aids to contract interpretation. The starting point is the parol evidence rule, which restricts the admissibility of extrinsic evidence as a means of adding to, varying or contradicting a written agreement. For related information, see the Practice Notes: Contract interpretation—admissibility of surrounding documents and Contract interpretation—admissibility of pre-contractual negotiations and statements.

Parol evidence rule—what is it?

The parol evidence rule provides that, where parties have a signed agreement, it is not generally permissible to adduce extrinsic evidence to:

  1. show what the parties’ intention was in entering that agreement

  2. contradict, vary or add to the terms of the written agreement—this extends to implied terms

The parol evidence rule only applies in respect of written contracts.

The parol evidence rule operates to exclude not only oral evidence, but all forms of evidence outside the contract itself such as:

  1. earlier drafts of the agreement between the parties

  2. preliminary agreements

  3. correspondence leading up to the agreement

Parol evidence rule—why does it exist?

The purpose of the rule is to provide certainty. Lawyers advising on the meaning of a contract need to know that there will not be a later attempt to rely on extrinsic evidence pre-dating the contract to show the intention

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