Parol Evidence Rule & Exceptions

Introduction

The parol evidence rule is a contract law principle that controls when a court will look beyond a written agreement. If the parties intended their written contract to be a complete and final record of their terms, earlier or simultaneous statements outside that document are generally not admissible to contradict, vary, add to, or subtract from it.

The rule supports certainty and reduces the scope for false or selective claims about pre‑contract discussions. It is not absolute. Courts will consider extrinsic material in well‑recognised situations, especially where fairness requires it or where the real issue is whether a contract exists at all. A key threshold question is whether the writing was intended to be a complete statement of the deal.

What You'll Learn

• What counts as parol (extrinsic) evidence
• When the rule applies and the role of entire agreement clauses
• How the rule treats prior or contemporaneous statements versus later variations
• The main exceptions: ambiguity, collateral contract, misrepresentation/fraud/duress, condition precedent, rectification, and trusts to prevent fraud
• Leading cases including Henderson v Arthur, Shogun Finance v Hudson, City & Westminster Properties v Mudd, Pym v Campbell, Raffles v Wichelhaus, and Rochefoucauld v Boustead
• Practical steps for drafting, negotiations, and disputes

Core Concepts

What counts as parol evidence

Parol evidence means anything outside the four corners of the written contract, such as:

• Prior drafts, letters, emails, or term sheets
• Oral statements made before or at the time the contract was signed
• Trade talk or side promises that did not make it into the document

Simple examples:

• If a business sale agreement states a fixed price, a buyer cannot usually rely on earlier oral assurances of a lower price to contradict that figure.
• If a lease states a rent, a tenant is normally barred from introducing a prior conversation that discussed a different amount.

The rule assumes the writing is the authoritative record once the parties intend it to be complete.

When the rule applies

The rule applies only if the parties intended the written document to be a complete and final record of agreed terms. Courts infer this from the document’s language and the surrounding circumstances.

• Entire agreement clauses strongly indicate completeness and will usually prevent arguments that other terms were agreed.
• Where the writing is not complete (for example, a brief note or heads of terms), courts may allow consistent additional terms to be proved, provided they do not contradict the writing.
• Where legislation requires certain contracts to be in writing, courts are especially reluctant to admit oral terms that would alter the written text.

Tip: Check for both an entire agreement clause and any “no oral modification” clause. The first aims to prevent earlier or parallel statements being treated as terms; the second aims to prevent later oral changes.

Scope and limits of the rule

The rule excludes only prior or contemporaneous statements about terms. It does not exclude evidence:

• That no binding contract was formed (for example, no consensus, identity error, lack of authority or capacity)
• That the contract is invalid (for example, fraud, misrepresentation, duress, illegality)
• Of a later variation or rescission (subject to any no oral modification clause)
• That clarifies the meaning of ambiguous wording
• Of implied terms by statute or common law (these do not depend on parties’ prior statements)

In short, the rule concerns the content of a final written bargain, not whether a bargain exists or remains enforceable.

Key exceptions at a glance

Courts admit extrinsic evidence in several recognised categories:

• Ambiguity or uncertainty: to explain a term that can fairly bear more than one meaning (Raffles v Wichelhaus).
• Collateral contract: to prove a separate side promise that sits alongside the main written contract (City & Westminster Properties v Mudd).
• Misrepresentation, fraud, or duress: to show the writing should not stand because consent was tainted (for duress see Attorney‑General v Whelan).
• Condition precedent: to show the written contract was not to take effect unless a stated condition occurred (Pym v Campbell).
• Rectification: to correct a written document that fails to record the parties’ actual agreement. The evidential threshold is high; clear and convincing proof is required.
• Trusts of land to prevent fraud: to prove a trust orally where denying it would be fraudulent (Rochefoucauld v Boustead).

Note: These are often described as situations where the rule does not block the evidence because the evidence goes to meaning, validity, effectiveness, or a separate promise rather than altering a complete written term.

Key Examples or Case Studies

Henderson v Arthur [1907] 1 KB 10

• Background: A tenant claimed there was a prior oral agreement that the landlord would accept set‑offs against rent, despite a written lease requiring rent to be paid in cash.
• Decision: The oral agreement was not admissible. The written lease governed.
• Practical point: Prior oral terms that contradict a complete written contract will usually be excluded.

Shogun Finance v Hudson [2003] UKHL 62

• Background: A rogue used someone else’s identity to obtain a car under a hire‑purchase agreement in writing, then sold the car to an innocent buyer.
• Decision: The written agreement named the genuine person, not the rogue. The writing was treated as conclusive of the identity of the contracting party.
• Practical point: Where the agreement is in writing and intended to be conclusive, courts are slow to accept oral evidence that rewrites who the parties are or what was agreed.

City & Westminster Properties v Mudd [1959] Ch 129

• Background: A lease stated the property was for business use only. The landlord had assured the tenant he could sleep on the premises.
• Decision: The tenant could rely on a collateral contract allowing him to sleep on the premises alongside the written lease.
• Practical point: A genuine side promise, supported by consideration and not contradicting the written term in a way that defeats the written purpose, can stand as a separate bargain.

Pym v Campbell (1856) 6 E&B 370

• Background: A written agreement to buy a patent was said to be subject to a third party’s approval.
• Decision: Evidence of the oral condition precedent was admissible. The condition had not been met, so the agreement did not take effect.
• Practical point: Parol evidence may show that a written contract was never to operate unless a specified event occurred.

Raffles v Wichelhaus (1864) 2 H&C 906

• Background: A sale of cotton was to arrive “ex Peerless from Bombay”. There were two ships called Peerless sailing from Bombay.
• Decision: Evidence showed the parties had different ships in mind, so there was no agreement.
• Practical point: Where language can fairly point in two directions, extrinsic material can be used to resolve ambiguity or reveal there was no consensus.

Rochefoucauld v Boustead [1897] 1 Ch 196

• Background: Land was conveyed with an oral understanding that it would be held on trust. There was no written trust.
• Decision: The court admitted oral evidence of the trust to prevent fraud.
• Practical point: The rule will not be used to shelter dishonest conduct; equity will allow proof of a trust over land where necessary to prevent fraud.

Attorney‑General v Whelan [1934] IR 518

• Background: The case explains the nature of duress (in a criminal context).
• Relevance: In contract cases, evidence of threats or coercion is admissible to show that apparent consent was not free.
• Practical point: Proof of duress or misrepresentation goes to validity, so it falls outside the bar on parol evidence.

Practical Applications

• Drafting

  • Use an entire agreement clause to confirm the writing is the only record of agreed terms.
  • Add a non‑reliance statement if you want to limit claims based on pre‑contract statements. Ensure any clause is reasonable where the Misrepresentation Act 1967 applies.
  • Include a no oral modification clause to control later changes. Give a simple written amendment process.
  • Avoid stray promises in emails or meetings that could be characterised as collateral contracts. Keep communications consistent with the final document.

• Negotiations and sign‑off

  • Record key promises in the contract or in a signed side letter. If a point matters, put it in writing.
  • If a term is intended as a condition precedent, state it expressly.
  • Where wording might be uncertain, add definitions or examples to cut down on ambiguity.

• Transaction hygiene

  • Keep version control: preserve drafts and mark changes clearly. This helps if rectification is later required.
  • Identify the contracting parties precisely. Use correct legal names and company numbers to avoid identity disputes.
  • For property or trust arrangements, confirm in writing where statute requires it. Where that is not done, expect the court to look closely at any claim that a trust was intended.

• Litigation strategy

  • Ask first: is the document a complete and final record? Look for entire agreement wording and the level of detail.
  • If you need extrinsic material admitted, choose the correct route: ambiguity, collateral contract, misrepresentation, duress, condition precedent, rectification, or trust to prevent fraud.
  • Gather clear, contemporaneous evidence. Rectification demands convincing proof that both parties shared the same agreement not captured in the writing.
  • Be realistic about contradictions. Courts will not accept external terms that rewrite a clear, final document.

Tip: Plead in the alternative where appropriate (for example, an interpretation case alongside misrepresentation), as different routes engage different rules on admissibility.

Summary Checklist

• Is there a written contract intended as a complete and final record?
• Is there an entire agreement clause or a no oral modification clause?
• Is the evidence offered about prior or contemporaneous statements (rule applies) or about a later variation (rule does not apply, subject to NOM)?
• Is the dispute about validity (fraud, misrepresentation, duress, mistake, illegality) rather than content? If so, the rule does not block it.
• Is there genuine ambiguity in a term that needs explanation?
• Do facts support a separate collateral contract with its own consideration?
• Was there a condition precedent to the written contract taking effect?
• Is rectification appropriate, with clear and convincing proof of a shared prior agreement not reflected in the writing?
• For land and trusts, would excluding oral proof enable fraud (Rochefoucauld v Boustead)?
• For strict application of the rule, remember Henderson v Arthur and Shogun Finance v Hudson.

Quick Reference