When Your Contract Doesn’t Say What You Thought it Was Going to Say

When we negotiate contracts, many people tend to put a lot of focus on the negotiating part, and less emphasis on the actual, reviewing the written contract part. They just naturally assume that whenever the parties agreed verbally before the contract’s formation is what the actual end written agreement says.

But that doesn’t always happen, and when what was understood pre-contract and what is in the actual contract are different, there can end up being disputes and even litigation.

What Did You Say Beforehand?

It would seem fair to say that if you agreed to something before the contract was entered, that’s what the contract should say, and if it doesn’t, you should be excused from performance or penalty under the contract. But that’s not exactly how the law works.

The law assumes that your final written agreement is a reflection of the things that you agreed to, before the contract was drafted and signed–in other words, that the signed contract is a full complete and accurate understanding of the parties, otherwise you wouldn’t have agreed to it.

The Parole Evidence Rule

What is known as a parole evidence rule, is the rule that allows some of those pre-contractual agreements to be used in court, to amend, modify, or excuse performance under a contract. But the rule isn’t absolute–there are only limited times when a party can use parole evidence (evidence of discussions or understandings that happened before the contract was entered into).

One situation is ambiguity. If there are words or phrases that seem to be undefined, confusing, or subject to multiple meanings, a court can look to the pre-contractual discussions between the parties, to try to define that ambiguous term.

The same goes for situations where the contract may contradict itself.

You can also use the rule, when a contract is just incomplete–when there is some essential term missing or undefined, and that term is necessary to understand the contract or even make it valid. This often happens when the parties thought they had agreed to all the necessary terms of a contract, but it ends up on the written contract, that the necessary terms are actually not there.

When the Rule Cannot be Used

The rule of thumb is that if there is a problem with the contract itself, the parole evidence can be used. But what you cannot do, is use pre-contractual discussions to add or get rid of things that the parties just thought should or should not have been there. Or, to just simply change a term or condition of a contract that the parties thought was going to say one thing, but ended up saying another.

It is obviously best to avoid using the parole evidence rule completely–read your agreements, to ensure they say what you believed that they would say.

Call our West Palm Beach business litigation attorneys at Pike & Lustig to help you in your breach of contract case.

Source:

jec.unm.edu/education/online-training/contract-law-tutorial/the-parol-evidence-rule