What is the parol evidence rule, and what is the court's reasoning in applying the rule

Home, - What is the parol evidence rule

Question 1 - a) What is the parol evidence rule, and what is the court's reasoning in applying the rule?

b) List and explain the exceptions to the parol evidence rule.

Answer -

a) A parol evidence rule finds place in common law in the cases of contracts. With this rule, a party is barred from bringing up outside evidence seeking ambiguity, clarification or additions to an existing written contract.

Courts apply this rule in cases where a certain party brings in past events or agreements into the present written contract. Purpose is that when the parties to the contract have taken efforts to draft the contract and put the agreement in a single written contract, any evidence of past agreements or terms made between the parties which is not a part of the written contract shall not be considered in the interpretation of the contract.

b) The exceptions to the rule of parol evidence are -

1. There exists defects or errors in the written contract because of mistakes or fraud.

2. Ambiguous contracts with parties intentions.

3. When there exists problems with the consideration.

4. A prior valid agreement was not mentioned or present in the written document.

5. The other arrangement does not challenge the main contract in question.

6. A certain condition was required to occur before the contract becoming due.

7. In case of a subsequent modifications to the contract.

Question 2 - a) Consideration must be sufficient but does not have to be adequate. What does this mean?

b) Can you give examples of consideration which are: Sufficient but not adequate; and Not sufficient nor adequate.

Answer -

a) Consideration must be sufficient indicates that since consideration being a price, should be something in real and should have some value. Consideration, by definition means something of value which a contracting party promises to pay or provide the opposite contracting party in return for a consideration paid by the opposite contracting party. It is very important in a contract as it is not known how one action will impact the other person. Consideration being an essential element of a contract is decided with consent of the contracting parties. If a consideration is absent in a contract, the contract becomes void. Both Offer as well as its acceptance is subscribed within consideration. Only when consideration is established, a legal relation is there. It is therefore one of the main building blocks of a contract. However, it is not necessary for a consideration to be adequate. A consideration which is sufficient is also possible and creates a valid contract. The only requirement is that a contract should be supported by a consideration to become enforceable under law. Only a party who has provided a consideration can enforce a contract. The only requirement is that the consideration should be lawful. It may be past present or future or anything done or given.

b) -Sufficient but not adequate - A agrees to sell his houseat a price of $5 million. B, a friend offers to buy the house. As a gesture of friendship, A sells the house to B for $4 million.

-Not sufficient nor adequate - A gives a pen to B as a gift. On receiving, B tells he would also gift a notebook to A the next day. This is not a contract as there is no consideration or agreement involved. The consideration is neither sufficient nor adequate.

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