Transcript Chapter 11

Chapter 11
Parol Evidence Rule
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Introduction
• Bank of Australasia v Palmer (1897)
– “parol testimony cannot be received to
contradict, vary add to or subtract from the
terms of a written contract, or the terms in
which the parties have deliberately agreed to
record any part of their contract.” (per Lord
Morris)
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Exceptions
• It has been said that “this archaic rule has
been virtually abolished by various judicial
pronouncements” (Friel, The Law of
Contract (1995), p 153).
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• Rule only applies where the written
agreement is the whole agreement
• Howden Brothers v Ulster Bank (1924)
– Firm orally agreed to build a ship and a letter
was sent to the plaintiff confirming the order.
Letter did not demonstrate that the property in
the boat was intended to pass to the plaintiff
was it was being constructed, but oral
evidence relating to the intention of both
parties and the background indicated this and
was admissible to show same
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• Clayton Love v B & I Steampacket
Company (1970)
– Written contract gave details of how goods
were to be carried, but there was an oral
variation of those terms. Evidence of this oral
variation was admissible to show the terms of
the totality of the contract
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• 2. Parol evidence is admissible for the purposes of
interpreting a written contract, by explaining the
surrounding circumstances.
• Chambers v Kelly (1873)
– a written contract for sale of trees related to the sale of oak trees
and ”all other trees” in oak plantations. Parol evidence was
available to show that the intention of the parties in respect of
what “all other trees” referred to. This showed that the felling
rights transferred only applied to a limited set of other trees –
namely Larch trees.
• ESB v Newman (1933)
– parol evidence was admitted to show the meaning of the term
“accounts”.
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• 3. Parol evidence can be admitted to
explain the background of an agreement
to show the circumstances in which it was
reached
• Revenue Commissioners v Moroney
(1972)
– Oral evidence was admitted to show that the
parties did not intend that the purchase price
would ever be paid
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However….
• One cannot adduce evidence relating to the subjective
intentions of the parties as to what they understand the
agreement to mean in a subjective sense.
• Nor can one admit evidence of past negotiations to
explain the present meaning of contractual terms. Such
would trump the general rule that the parties subjective
intentions cannot overlay the words actually used.
• Rather “what is permissible is evidence of the factual
context in which the parties came to terms”.
• Will be re-addressed in “Construction of Contracts”
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• 4. parol evidence is admissible where it is
alleged that a particular transaction is not
limited to one written contract, but embodies
another oral and collateral contract
• City and Westminster Properties v Mudd (1958)
– Written lease prohibited the tenant from using the
property for residential purposes, but an oral promise
was made that this prohibition would not be enforced
against him. When the plaintiff sought to enforce this
term, it was held that parol evidence to this effect was
not admissible to contradict the terms of the lease
itself. There was, however, a separate oral contract
that the prohibition in question would not be enforced;
and since this separate contract was not in writing,
there was no question but that parol evidence was
admissible to explain the terms of this contract.
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• 5. parol evidence will be admissible to
establish that a document which
purports to be a contract is not in fact a
contract for some reason.
• Pym v Campbell (1856)
– Parol evidence was admitted to show that a
written agreement was not intended to have
any legal force until such time as an engineer
had inspected and approved of its subject
matter. Consequently, no contract had been
established, but merely the terms on which a
contract might be entered into.
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• Sixth, parol evidence is admissible to
prove a custom or practice, to show
(seventh) that a contract suffers from a
mistake, to prove out (eighth) non est
factum or (ninth) fraud or (tenth) any
entitlement to equitable relief.
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