Contract Law: Parol Evidence

Douglas Wilhelm Harder, M.Math. LELDepartment of Electrical and Computer Engineering

University of Waterloo

Waterloo, Ontario, Canada

ece.uwaterloo.ca

dwharder@alumni.uwaterloo.ca

© 2013 by Douglas Wilhelm Harder. Some rights reserved.

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Outline

An introduction to the engineering profession, including:– Standards and safety– Law: Charter of Rights and Freedoms, contracts, torts, negligent

malpractice, forms of carrying on business– Intellectual property (patents, trade marks, copyrights and

industrial designs)– Professional practice

• Professional Engineers Act• Professional misconduct and sexual harassment

– Alternative dispute resolution– Labour Relations and Employment Law– Environmental Law

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The Contract as a Starting Point

When a contract is established, this becomes the entire basis for any future interpretation of the benefits and obligations of the parties– If a term is included in the contract, it is assumed it was agreed

upon by all parties– If something is left out of the contract, it is assumed that that all

parties agreed to such an omission

Any discussions, communications, letters of intent, etc. prepared prior to the contract, in general, cannot be used in any way to interpret the contract

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Parol Evidence Rule

The doctrine that the contract forms a common basis for the agreement is known as the parol evidence rule

This doctrine prevents any party to a written contract from presenting past (usually oral) evidence that contradicts or adds to the terms of a contract that appears to be “whole”

The word parol means speech or agument from Anglo-Normal

cf. the French verb parler

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Parol Evidence Rule

While we will discuss many exceptions to the parol evidence rule, you must realize that these are all relatively special cases

Do not let the myriad of exceptions to this rule suggest that courts do not apply this rule for the vast majority of contracts

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Exceptions

In general, evidence from communications prior to the establishment of the contract fall into one of three categories:

1. To demonstrate that no contract ever existed

2. In the interpretation of ambiguities

3. As a question of equity

We’ll look at a few cases

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What was Intended

In Bacchus Marsh Concentrated Milk Co Ltd v Joseph Nathan and Co, 1919, equity allowed a correction (“rectification”) of a written agreement

“with what one party intended and theother party knew the first

intended.”

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Intent to Enter into a Contract

Prior oral evidence was used to demonstrate in Pym v Campbell, 1865, that there was no intention to enter into a contract unless the invention was inspected and approved by two engineers

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Wrongful Purpose

To demonstrate conduct such as– Misrepresentation– Fraud– Duress– Unconscionability – Illegal purpose

For example, consideration must have some other purpose other than evading taxes

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When the Rule Applies

In Hospital Products Limited v United States Surgical Corporation, 1984, parol evidence was used to show that the written document is only part of the contract

State Rail Authority of NSW v Heath Outdoor Pty Ltd., 1986, found, however, that the parol evidence rule only applies once it has been determined the entire contract is in writing: “The existence of writing which appears to represent a written

contract between the parties is no more than an evidentiary foundation for a conclusion that the agreement is wholly in writing.”

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References

[1] D.L. Marston, Law for Professional Engineers, 4th Ed., McGraw Hill, 2008.

[2] Julie Vale, ECE 290 Course Notes, 2011.

[3] Wikipedia, http://www.wikipedia.org/

These course slides are provided for the ECE 290 class. The material in it reflects Douglas Harder’s best judgment in light of the information available to him at the time of preparation. Any reliance on these course slides by any party for any other purpose are the responsibility of such parties. Douglas W. Harder accepts no responsibility for damages, if any, suffered by any party as a result of decisions made or actions based on these course slides for any other purpose than that for which it was intended.

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