V.5. 5. What Is The Parol Evidence Rule?

• Jurisdiction: New York

5. What Is the Parol Evidence Rule?

The parol evidence rule is a rule of substantive law, not one of procedure or evidence. The rule has two facets. First, when the contract is clear and unambiguous, extrinsic evidence outside the four corners of the parties’ contract is not admissible to vary or contradict contract language. The extrinsic evidence cannot alter a written agreement.³³⁶ Evidence outside the four corners of a written contract as to what the parties allegedly intended but failed to state, or misstated, in their agreement generally will not be considered to add to or vary the terms of a clear, unambiguous written contract. The second facet of the parol evidence rule precludes the finding of a prior oral agreement between the parties addressing the same subject matter covered in an integrated written contract.

When parties have set down their agreement in a clear, complete document, their writing should be enforced according to its clear, unambiguous terms.³³⁷ The parties are presumed to have understood the meaning of the words they used.³³⁸ Plain meanings may not be changed by parol evidence.³³⁹ Parol evidence cannot create an ambiguity in a written agreement that is clear and unambiguous on its face. ³⁴⁰

The parol evidence rule bars the consideration of pre-contractual verbal statements and representations to alter the writing. The prior negotiations and communications between the parties are not admissible to change the clear, unambiguous terms of their contract. Similarly, the prior practice of the parties under the contract or similar agreement will not be considered to give meaning to a clear and unambiguous contract.³⁴¹ An alleged prior practice cannot change a clear and unambiguous contract unless the practice could be viewed as manifesting an agreement by the parties to amend the terms of their agreement.

When a contract is clear and unambiguous, considering extrinsic evidence could improperly allow a party to substitute its own view of its obligations for what the contract clearly states. The parol evidence rule prevents the subjective intent of a party from being substituted for the plain meaning of the contract. What a party thought the contract meant is immaterial for the language of the contract is controlling.

A rationale for the parol evidence rule is that the parties’ written agreement supplants the parties’ prior agreements or understandings. When the parties sign a written contract, all of their prior communications...