Parole Evidence Rule

Question 1

Parole evidence rule =?

Answer 1

The rule that says you cannot vary the terms of a written contract with oral evidence or anything that isn’t written.

Question 3

Parole Evidence Rule =?

Answer 3

A recognition that the best evidence in contracts is written.

When there is a written contract, an allegation of an oral promise made prior to or contemporaneous with the written contract, and the oral promise contradicts the written contract, then the oral promise is inadmissible as evidence and the written contract stays.
o In other words, the oral term would not be able to be a term. Then the best you could do is argue it as a misrepresentation.

Question 4

Major Exception to the PER: Misrepresentation.

Answer 4

• If there was a prior oral statement made that induced you into the contract, and it is allegedly either innocent misrepresentation or fraudulent misrepresentation, then the parole evidence rule does not apply and the statement is therefore admissible as evidence to support that claim.
  o Why would that be?
  (1) in practice, if the PER prevented evidence of representations prior to entering a contract, then you could not have a law of misrepresentation.
  (2) in theory, the PER says that you cannot take a prior oral statement that contradicts a written contract for the purpose of changing a written contract. But with misrepresentation you’re not making a promise, but rather the statement induced you into the contract. Now that person wants to rescind the contract.
  à recission is a way to get out of the contract, rather than change the meaning/terms of the contract. PER therefore does not apply.

Question 5

Hawkish v Bank of Montreal
(Authority for the Proposition of the PER)

Answer 5

Test for the PER
1) you have a written contract
2) you have an allegation of an oral promise made prior to or contemporaneous with the written contract
3) if that oral promise contradicts the written contract then it is inadmissible as a term and the written contract stays last the parole evidence rule

• PER doesn’t apply to misrepresentation of facts, only terms.

Question 6

Gallen v Allstate Grain Co., 1984
(Exception to the PER: Parol that adds (but doesn’t contradict) contract can be admitted)

Answer 6

If the parol (oral) evidence doesn’t contradict, but simply adds to the obligations (terms) of the written contract, so long as they are not contradictory, the terms may be admitted.

1. Whether you do a two-contract or one-contract theory (1 written and 1 oral contract), the PER applies equally. You cannot get around the PER by saying that the oral statement goes to establish a collateral contract (a second secret oral contract) instead of contradicting the written contract. True
	- Essentially you cannot have 1 written and 1 oral contract separately that contradict each other.
4. misrepresentations — if you are pointing to a prior oral statement to support a claim for a misrepresentation, either innocent or fraudulent, that is not captured by the PER true
5. Introducing statements that vary, subtract, or contradict. True-ish
	○ The PER is narrow in the sense that oral statements (prior to or contemporaneous with a written contract) are inadmissible if they contradict a written contract true
	○ Exception: you can introduce statements made before that add to the written contract without contradicting. Generally true (as long as no contradiction, sometimes can be admissible) true
	○ If the oral statement subtracts from the written agreement, then it is contradictory and the PER applies. true

Question 7

Two more exceptions to the PER

Answer 7

1) Common law exception – Ambiguity
- If the written contract is ambiguous then you may turn to oral statements to clarify the meaning.
○ You must first state that the contact is actually ambiguous.
○ However, even if the written contract is ambiguous, you can’t use the oral statements to clarify the meaning if it is contradictory with the ambiguous written statement.
- The PER does not apply to circumstances where there is a prior oral statement and a written contract, and there is an ambiguity in the written contract
- If there is an ambiguity, then you can turn to prior to oral statements to help clarify the ambiguity. This helps the court understand as an interpretive exercise what the parties meant by the written language.
- This is acceptable only where there is no contradiction.
2) Statutory Modification
- Business Practices and Consumer Protection Act, section 187 see below
- In a consumer transaction, you can always admit parol evidence to help explain what the parties understood by the written contract.
- In other words, in a consumer transaction, you can always admit Parol evidence to help explain what the parties understood by the written contract.
- It’s just like the last exception but it’s even more generous, because applies to situations without any ambiguity in the contract.