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Parol Evidence: Definition, Example and Related Terms

What is Parol Evidence ?

Parol evidence refers to any oral or written statements that are not included in the final written contract. It represents discussions or agreements that took place before or at the time of signing the contract but were not included in the original document. Parol evidence is pivotal in contract law, particularly under the Parol Evidence Rule, which generally prohibits the introduction of evidence intended to contradict or modify the written terms of a contract. This rule helps ensure that the written document is seen as the definitive and complete record of the agreement between the parties.

For example, if two businesses create a written sales contract after negotiating several terms orally, parol evidence refers to any of those oral negotiations not captured in the written agreement. Under most circumstances, these cannot be used to challenge or change what was finally written unless exceptions apply, like addressing ambiguities or instances demonstrating fraud, mistake, or duress.

Understanding the limitations posed by parol evidence is essential for contract managers and legal professionals, as it underscores the importance of ensuring that all significant terms and conditions are included in the final written agreement. A clear awareness of what can and cannot be considered in potential disputes can inform how contracts are drafted and negotiated, ultimately serving to protect all parties involved from unintended obligations or interpretations.

Example(s)

  • Scenario Description
    A buyer and seller negotiate over the phone and verbally agree that the seller will include a free warranty. When they later draft a written sales contract, the warranty is not mentioned. If a dispute arises, the buyer cannot usually use parol evidence of the oral agreement to add the warranty to the contract.
    Two companies settle a service agreement, but verbally agree on additional training sessions. If the written agreement does not include these training sessions, attempting to enforce them later using parol evidence would likely be ineffective unless exceptions apply like clarifying an ambiguity.