Participants in contractual litigation often hear about the Parol Evidence Rule. To a lay person, the name of that substantive rule of law may create some confusion. The Parol Evidence Rule does not have anything to do with the criminal justice system. Perhaps, the use of the word “parol” rather than “parole” gives the image of “Red”, the character from the classic film, “The Shawshank Redemption” sitting before the parole board seeking his exodus from the Shawshank prison. It is not.
The Parol Evidence Rule is a substantive rule which states that whenever contractual intent is sought to be ascertained from among several expressions of agreement by the parties, an earlier tentative agreement will be rejected in favor of a later expression that is final. Harker v. Kissock, 12 N.J. 310, 321 (1953). Simply stated, the final agreement made by the parties supercedes any terms discussed in earlier negotiations. The “purpose of the Parol Evidence Rule is not to exclude unreliable evidence, but to exclude evidence, however reliable, of negotiations and understandings which the parties intended to supplant with the agreement under consideration.” J.I. Kislak Realty Corp. v. 6051 Blvd. East Corp., 192 N.J. Super. 280, 283 (App. Div. 1983). The policy behind the rule is to give the writing a preferred status, which renders it immune to perjured testimony and the risk of “uncertain testimony of slipping memory.” McCormick, The Parol Evidence Rule as a Procedural Device for Control of the Jury, 41 Yale L.J. 365, 366-377 n. 3 (1932); Wallach, The Declining “Sanctity” of Written Contracts — Impact of the Uniform Commercial Code on the Parol Evidence Rule, 44 Mo. L. Rev. 651, 653 (1979); Binks Mfg. Co. v. Natl. Presto Indus., Inc., 709 F.2d 1109 (7th Cir. 1983). In other words, if a party seeks to introduce terms which were memorialized in a written, binding contract they may be excluded by the Parol Evidence Rule.
The Parol Evidence Rule comes into play where the last expression is in a written binding contract. Courts asked to make a ruling as to the applicability of the Parol Evidence Rule generally consider whether or not the writing is the final embodiment of the parties’ entire agreement. To aid Court’s in making this determination, contractual drafters often utilize a merger clause to provide a clear, unmistakable proof that the writing is the final expression of all of the terms agreed upon and is a complete and exclusive statement of those terms. Courts consistently have enforced merger clauses. See A. N. Airlines, Inc. v. Schwimmer, 12 N.J. 293, 302 (1953) (holding, the “parol evidence rule ‘purports to exclude testimony’ only when it is offered for the purpose of ‘varying or contradicting’ the terms of an ‘integrated contact’”); Inter-City Tire and Auto Ctr., Inc. v. Uniroyal, Inc., 701 F. Supp. 1120, 1126 (D.N.J. 1989), aff’d Uniroyal, Inc. v. Erbesh, 888 F.2d 1382 (3d Cir. 1989). A merger clause sets forth that the written, binding contract is the final embodiment of the parties agreement. That clause specifically excludes all prior negotiations and/or discussions from the contract. Finally, a merger clause sets forth that all changes to the contract must be in writing signed by all parties to the contract.