Legal Ease

The Parol Evidence Rule: If It’s Not in the Contract It’s Not Part of the Deal

By Charles A . “Chip” Gentry

A dear friend of mine and perpetually repeat client, Mark Downing, the owner of Marked-Down Windows LLC, once again walked into my office last week. He was extremely frustrated with a vendor client of his, Pete Swindler of Freaky-Fast Fenestration Installs Inc.

“Pete ordered 100 of our newest glazing units for a new apartment building last month. Before we signed the final contract on the dotted line, he told me he would make MarkedDown the exclusive manufacturer of all windows on the project from here on out,” said Mark. “But when I stopped by the site the other day, a truck from Dime-A-Dozen Windows LLC dropped off a ton of additional product. What the heck!”

“Well, Mark, did the contract specifically say that Marked-Down would be the exclusive provider of windows to Freaky-Fast,” I asked.

“No. I just took Pete at his word,” answered Mark. “Can I go after Pete for going back on his word?” asked Mark.

“You can,” I answered. “But you’re likely going to lose. Now, let me tell you a few basics about the Parol Evidence Rule so we can prevent this from happening again, Mark.”

WHAT’S THE EVIDENCE?

The Parol Evidence Rule is a contract law principle that bars evidence of prior written or oral communications between the parties that occurred before signing a contract outlining the final terms of the agreement. In laymen’s terms, the parol evidence rule states that the final written agreement is just that, and that prior conversations, negotiations, and notes cannot alter the terms of said final agreement. In deciding whether or not the parol evidence rule applies, courts look at two factors: (1) is the writing intended as a final expression, and (2) is the writing a complete or partial integration?

The more complete an agreement is, the more likely the parties intended it to be a final expression of their agreement. For example, if Mark presented evidence that on three prior occasions he and Pete discussed order size, dimensions, and color, and the signed contract contained details outlining all three of these provisions, the agreement is more likely a final expression of Mark and Pete’s bargained-for agreement. The dichotomy between a complete or partial integration hinges on the intent of the parties. While the
Uniform Commercial Code and many state courts presume all writings are partial agreements, often the terminology at the beginning of the contract determines integration classification. For example, if the contract contains an introductory clause stating that “this agreement supersedes and overrules any and all prior agreements or discussions between the parties,” then the contract is more likely to be considered a complete integration as opposed to a partial integration. Similar language is often included at the
outset of many form contracts in the United States.

DO YOUR HOMEWORK

The overarching point is this: (1) read the contract carefully, or better yet, have your attorney read and review the contract, and (2) make sure everything you want included in the deal is incorporated into the final agreement. While many vendors, installers, and project managers are worthy of being taken at their word, the law is extremely unforgiving and has very little sympathy for word-of-mouth reliance. Courts give far more credence to written documentation. While defenses like fraud or mistake may still render the contract invalid, it is better to make sure you receive exactly what you bargain for the first time around. Both your bottom-line and your well-being will thank you.

Charles A. “Chip” Gentry is a founding member of  Call & Gentry Law Group in Jefferson City, Mo. He can be reached at chip@callgentry.com.

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