How justified is the fact that Parole Evidence Rule has outlived its importance in the modern day life?

The parol evidence rule has long been a controversial element of the common law system. It has been frequently attacked for the injustices that result from its application and sometimes even for a lack of rationality in its justification. This exposition results from the conviction that useful light can be shed on the problems surrounding the parol evidence rule by an examination of its status in other common law jurisdictions, where it has also been the subject of constant dispute throughout the previous half century.

The written document produced by the parties is merely a memorandum of the agreement that they have reached. Consequently, when a court attempts to resolve a dispute regarding the agreement, the written document is construed as persuasive evidence of what was agreed, and can be contradicted by other evidence tending to show that the actual agreement was something different. By contrast, the objective theory of contracting holds that the written document is in fact the agreement itself, so that in attempting to discern the nature of the bargain between the parties it is improper to admit evidence that contradicts the written document. Since the actual intentions of the parties are not being considered by the court, evidence that would tend to demonstrate that their intentions were something other than the written document reflects is simply irrelevant.

In Avis Vs Verseput 1943 Ad 331, the court was of the view that this was a situation in which the parties had intended that the contract should be partly verbal and partly written. To counter the problem of including evidence outside the written contract one should include an integration clause or a whole contract clause. This will be a term stating that the written document is will be an entire contract within the parties and all the terms, conditions, warranties and representation not herein included would be expressly excluded. This is a reinforcement of the Parole evidence rule. It is designed to promote certainty and one can argue that these exceptions make the written document uncertain.
In AFC Vs Pocock SC-135-96, P borrowed money from AFC. According to the contract AFC could come anytime and sell the farm in the event of P failing to pay or falling into areas. The contract had a non variation and a non-waiver clause. P fell into areas and had a discussion with one R who was the AFC general manager whereby it was agreed that instead of repossessing the farm, AFC would enter into agreement of payment in terms of which P would register a stop order. After that P was surprised to receive a letter from AFC, threatening that AFC was going to sell the property or the farm. P argued that they had entered into an Oral agreement with R so property could not be sold and that AFC should be estopped of denying of the existence of the oral agreement with the general manager. P’s argument was rejected by the Supreme Court.

In Cork Vs Osborne 1993(4) SA 788, the court ruled that one cant exclude oral evidence to establish a ground of validity of a contract. For example, a contract based on mistake. The courts are sometimes prepared to disregard the integration clause. Nonetheless, it is clear that limitations on the spread of literacy were a significant retardant to any legal privileging of written documents. Even if the parties had prepared a written document, it would often have been drafted by scribes, with the illiterate principals required to trust the integrity of the scribe. Consequently, the policy of the courts at the time was that even though a written document might serve as evidence of the true nature of the bargain in question, once the accuracy of the document was challenged it could no longer stand on its own, but had to be supported by witnesses. It is important to emphasise, however, that the practice was not simply to allow witnesses to be called to challenge the document. Rather, once a challenge had been made, witnesses also had to be called to support the document’s veracity. At this point, the document was not even privileged as a particularly persuasive form of evidence, and was treated as secondary to witness testimony. It is often coupled with and indulgence clause which says no indulgence made by a party to an agreement can be taken to be a waiver of his rights.

This aspect states that if the parties intended the contract to be wholly in writing, parol evidence is not admissible to add to or vary or contradict the writing: Robertson v Kern Land Pty Ltd. The rule excludes evidence of extrinsic terms only where the document was agreed to be a complete record of the entire contract, hence does not apply where the agreement is partly written and partly oral e.g. the varying of a pre-printing contractual form (Couchman v Hill).

The advent of exceptions to the Parole evidence rule is the one which give an explanation to the declining importance of the Parol Evidence Rule. These include Evidence of collateral contract. The prevention of extrinsic evidence being led to affect the main contract does not apply to the collateral contract; therefore, oral evidence relating to that contract can be led. The rule will continue to operate in relation to the main contract. When there is evidence that the written contract is not yet in force the rule will not operate. The rule will operate only if the contract is in force, and the written document reflects the contractual arrangement. In addition, the rule prevents introduction of extrinsic evidence that the parties varied the agreement before it was reduced to writing, not evidence that the parties later agreed to its variation or discharge. Unless the contract was one required to be in writing to be enforceable, neither the variation nor discharge need be in writing. Therefore, oral or other evidence can be led that the written agreement has been subsequently varied or discharged.

Although the rule will generally prevent the introduction of evidence to add to, subtract from or vary the agreement, the rule will not exclude such evidence if it is necessary to rectify the written document so as to correct such an error, for example the recording of a different sum other than agreed upon for the purchase of a house (NSW Medical Defence Union v Transport Industries).The aspect of interpreting the contract involves the rule being used to determine the true meaning of a contract and applying that meaning to the circumstances surrounding the entry into the contract. Extrinsic evidence of antecedent negotiation, the subjective intention of the parties and subsequent conduct appear to be inadmissible.

Extrinsic evidence of the factual matrix or setting of the contract is admissible. When a court embarks upon a process of construing a document, it must place itself in thought in the same factual matrix as that in which the parties were. Accordingly, when determining the parties intentions, the court may validly take into account not only the words recorded in the document but also evidence of the surrounding circumstances. The evidence of surrounding circumstances must be known to both parties. Extrinsic evidence may be admitted to resolve an ambiguity in the contract. Ambiguity extends not only to patent ambiguity - language that on its face is capable of more than on possible meaning, or is otherwise made unclear by the other language in the document (White v Australian and New Zealand Theatres Ltd), but also latent ambiguity – where an apparently clear meaning is shown to be ambiguous when extrinsic facts are taken into account (Hope v RCA Photophone of Australia Pty Ltd). Extrinsic evidence is admissible to resolve ambiguity about the subject matter of the contract. This is usually as a result of latent ambiguity. Thus the doubt created by extrinsic knowledge is resolved by extrinsic evidence.

Extrinsic evidence is admissible where there is ambiguity concerning the identity of the parties to the agreement, or concerning their relationship or the capacity in which they have entered into the contract. Furthermore, parole evidence is admissible to prove the real consideration under a contract where no consideration or nominal consideration is expressed in the instrument and the expressed consideration is in general terms or ambiguously stated or a substantial consideration is stated but an additional consideration exists, provided the additional consideration proved is not consistent with the instrument. Where the additional consideration is of a different kind, it will not be inconsistent unless perhaps the written instrument says that the stated consideration is the only consideration. Where a substantial consideration is stated, and the additional consideration is the same kind, for example the stated consideration is $100 000 and the true consideration is claimed to be $150 000, the argument for inconsistency is stronger. In addition, the language used in the instrument has a particular meaning, for example, by custom or usage in a particular trade, industry or region, evidence of that meaning is admissible, even if there is no patent ambiguity. Extrinsic evidence may be admitted to show that the parties intention was not accurately recorded in the written instrument. In appropriate circumstances, the document may be rectified so that it accords with the parties actual agreement.

However, evidence of the actual, subjective intentions of the parties is not admissible. Intention is ascertained objectively - a court cannot receive evidence from a party regarding his or her intentions and construe the contract by reference to those intentions (Life Insurance Co of Australia v Phillips). Prior negotiations that precede the written document is generally not admitted because the evidence is unhelpful (Prenn v Simonds). The nature of negotiation is that even if the parties intentions are convergent, they are still not the same and only the final document will properly reflect a consensus of the parties.

Evidence of subsequent conduct cannot be referred to for the purpose of interpreting the contract (Administration of Papua & New Guinea v Daera Guba) as parties may tailor their post contract behaviour according to the case they believe they later have to present in court and they may seek to advance their understanding of the agreement simply to persuade the other party to accept their construction; they expansion in the field of inquiry would add to the burden of fact finding and consequently the length and cost of litigation; and subsequent conduct may be based on an erroneous understanding of the parties rights (Hide & Skin Tradig v Oceanic Meat Traders).

Conclusively, it is pertinent that due to its limitations, the Parole Rule Evidence cannot be applied in all situations. Thus to a greater extent it has outlived its importance. This lag in granting written documents a privileged status is probably best explained institutionally, as the court system had by this time already evolved approaches that were regarded as adequate for determining the true nature of an agreement, such as the use of multiple witnesses. Consequently, courts would have felt no strong compulsion to adopt a new system that privileged written documents, especially when those documents could misrepresent the actual agreement, and could be forged.