American Contract Law for a Global Age, 2017a

contract itself. Thus written documents that are not the contract document can be
“parol” evidence to the same extent as oral testimony.
Given that certain cases involve both a written agreement and parol evidence
that tries to contradict or supplement the written agreement, an important question
arises as to how much credit to give the writing. To what extent can a party try to
prove that a contract means something very different from a written document? Are
parties bound by what they sign, or are they free to claim that the contract is
something else entirely?
The Rule. To deal with these issues, English common law over the years
developed what came to be known as the “parol evidence rule,” under which oral
agreements that seem to conflict with a writing the parties have adopted will be
refused enforcement. It rests on at least two assumptions. The first assumption is
that what the parties did at the time of the contract—that is, what they wrote and
signed—is likely to be better evidence of what their actual deal was than is their
subsequent self-serving testimony. The second assumption is that litigation is
expensive and parties should be able to rely on written agreements. If the written
contract requires delivery by August 15, for example, but one party now wants to
argue that the parties really intended delivery “any time so long as it is before
Christmas,” the parol evidence starts with the assumption that what the parties
wrote at the time is more likely to be the “true” agreement as to the delivery date
than what one party now claims—after a dispute has developed—the parties really
intended. Both the legal system and contracting parties benefit if they can know for
certain that “by August 15” means “by August 15” rather than “any time so long as it
is before Christmas.” Neither courts nor parties will then spend time, effort, and
money litigating over the issue.
Downsides to the Rule. Even if we grant these two assumptions, situations
arise in which enforcing the terms of a written agreement can result in injustice. It
would be absurd, for example, to prohibit a party who signed an agreement at
gunpoint from being able to prove the gunman’s threats merely because the contract
says, “The parties are entering this agreement freely and not under compulsion.”
Similarly, if two parties agree to the sale of a motorcycle totaled in a wreck for $50,
and the parties, intending to write $50.00 instead write $5000 (forgetting the
decimal) hardly anyone would argue that a court should force the buyer to pay the
larger amount. Thus, over the years some exceptions have been crafted to the strict
application of the rule. You will meet some in the materials that follow.
Statutory Parol Evidence Rules and Other Variants. While the parol evidence
rule arose as a common law innovation, there are various versions embodied in
statutes, such as UCC § 2-202. Even beyond the UCC, some states have codified their
general rules regarding admissibility of parol evidence, but others have left the rule
as a matter of common law. Each jurisdiction’s exceptions to the parol evidence rule
have developed more or less independently, creating great variation among the
______________________________________________________________________________
338 CHAPTER VI: TERMS AND INTERPRETATION