PAROLE EVIDENCE RULE

Once the contract has been reduced into writing, as a general rule, a party cannot bring extrinsic evidence to contradict the
contract or a term in the contract. This rule is known as Parol Evidence rule (Jacobs v Batavia 1924). This rule is said to have
preserve sanctity of written contracts, and also promote certainty. The rule prevents to disturb the entirety of a contract, by
not letting a party bring in other terms that were not incorporated in the contract.

The importance of this rule was highlighted by Lord Hobhouse in Shogun Finance v Hudson (2003) when he said ‘certainty
of the contract depends on it’.

The courts usually presume that a document that has a contractual force is a whole contract. However, this rule could lead
to injustice if it were applied too strictly. Hence this rule could result in manifest injustice if a document was procured by
fraud and the effected party was prevented to bring extrinsic evidence. Therefore, there are some exceptions to this rule to
minimise the injustice that it may lead to.

First, if a document that was not intended to contain whole agreement will fall outside this rule. In Allen v Pink, extrinsic
evidence was allowed by the court when a written document contained no terms except for the names of the parties and
price. Second, extrinsic evidence is allowed where it is required to prove an implied term or custom. In Hutton v Warren,
the court held a custom to be part of an insurance contract because there was no contrary evidence that the parties did not
intend it to be part of the contract. Third, extrinsic evidence may be allowed to show that the contract is void due to a
vitiating factor Campbell v Gall. Fourth, extrinsic evidence may be allowed to show that the contract has not commenced
or has ceased. In Pam v Campbell, the court allowed extrinsic evidence which proved that the oral negotiations of the
parties precluded the agreement to come into force till the invention was approved. Fifth, which is the most important of
all, the extrinsic evidence may be allowed to show the existence of a collateral agreement. In City and Westminster
Properties v Mudd, extrinsic evidence was allowed to prove the collateral agreement which allowed the tenant to use the
premises for business purposes.

The exceptions mentioned above raises questions on usefulness of parol evidence rule. Having said this, the rule is still held
to promote certainty in the contracts that contain an ‘entire obligation’ clause. In Sun Life Services v Campbell Martin, the
Court of Appeal highlighted the importance of such clauses, since it reduces litigation costs. However, the Court of Appeal
also mentioned that such clauses will not prevent liability for misrepresentation made prior to the contract.