The parol evidence rule is an important rule of evidence and contract law. In it's simplest statement, where a written contract exists, a party is not permitted to introduce any evidence from prior to the formation of the contract as to what the terms of the contract are. In other words, the written form of the contract is considered to be complete and final, and as such any allegation that the terms are anything other than what is in the written document cannot succeed.
However, there is one important exception - if a term of the contract is ambiguous, parol evidence is permitted to determine how the ambiguity is resolved.
- A written contract for a sale of a vehicle does not mention a warranty. When it breaks down three months later, the buyer claims the salesman told him it came with a twelve month warranty. This is impermissible parol evidence.
- An American and Canadian enter into a contract that requires the American to make payment in "dollars". When time for payment arrives, the American tenders American dollars, but the Canadian claims they were Canadian dollars (which at the time are worth more). In this case, parol evidence is admissible to resolve what the intentions of the parties were at the time the contract was made
The parol evidence rule has no bearing on conversations or documentation subsequent to the contract. There are several rules regarding contractual remedies that take into account the conduct of the parties after the contract is made.