Business Law Report: Analyzing Parol Evidence Rule and Exceptions

This report delves into the Parol Evidence Rule, a crucial concept in business law, which addresses the admissibility of oral or verbal assurances made prior to a written contract. It begins by defining the rule, citing the case of Mercantile Bank of Sydney V Taylor (1891), and explaining that such assurances typically hold no legal weight when a written contract exists, as established in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982]. The report then explores exceptions to this rule, such as when a contract is a combination of both written and oral agreements, illustrated by the case of Van den Esschert v Chappell [1960]. The report further discusses the conditions under which oral evidence is significant, emphasizing the need for an amalgamated contract or a separate consideration agreement. It also examines the exceptions that allow reliance on spoken promises, including situations where the contract is a combination of oral and written agreements, or when a trade custom exists. The report references several cases, including Pym v Campbell (1856) and Nemeth v Bayswater Road Pty Ltd [1988], to support its arguments and provide a comprehensive analysis of the Parol Evidence Rule and its practical implications in business law.

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BUSINESS LAW
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1BUSINESS LAW
(a) In order to discuss about the verbal assurance given by one of the parties to another
before resulting a contract by signing the agreement, the parol evidence rule is referred (Haji
2016). This rule was stated in Mercantile bank of Sydney V Taylor (1891) 12 LR (NSW) 252 (at
262)[2] and later on was observed in was expressed in Goss V Lord Nugent (1833) 5 B & Ad 58
(at 64-65). As per this rule, the parties to a contract are prevented from relying on the oral terms
or verbal assurance in case they have created the contract by means of written document as held
in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982]. Thus any assurance given
before signing the contract has basically no value when the contract is created by means of
signing the document. However in case the contract entered is half written and half oral or
combination of both written and oral agreement, then the verbal assurance can be considered as
in Gilberto v Kenny (1983) 155 CLR 691 (15 February 1983) High Court (Australia).
(b) In Van den Esschert v Chappell [1960] WAR 114, before putting signature on the
agreement of the contract, the purchaser made a query to the seller that the house which was to
be brought was whether without termites. The buyer was assured in clear words that the
concerned house was not affected by the termites and this made the buyer sign the contract. Thus
this is an example of combination of both written and oral agreement which is an exception of
the parol evidence rule that states that contracting parties are prevented from relying on the oral
terms or verbal assurance in case they have created the contract by means of written document as
held in Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24, High Court
(Australia). However in case of amalgamated contract which is combination of both written and
oral agreement, this rule is not available.
(c) In order to rely on the spoken promise, the contract concerned must be an amalgamation
of oral and written contract as in Van den Esschert v Chappell [1960] WAR 114. In this situation
only, oral evidence is of importance. Oral evidence can also be relied when there lies an
agreement with separate consideration.
(d) (i) In order to rely on the spoken promise, the exception of the parol evidence rule must be
relied upon by the buyer for enforcing the verbal promise as seen in Pym v Campbell (1856) 6 EI
& BI 370 (Wahana 2018).

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(ii) Firstly, the parties must show that the contract is the combination of both written and oral
agreement and as the parties cannot conclude from the written contract, they relied on verbal
statements or promises as in Nemeth v Bayswater Road Pty Ltd [1988] 2 Qd R 406. Secondly, if
there exists well-recognized custom or usage of trade involved in any contract, then this rule is
not applicable as seen in Hutton v Warren (1836) 1 M & W 466; 150 ER 517.

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References:
Codelfa Construction Pty Ltd v State Rail Authority of NSW [1982] HCA 24, High Court
(Australia)
Gilberto v Kenny (1983) 155 CLR 691 (15 February 1983) High Court (Australia).
Goss V Lord Nugent (1833) 5 B & Ad 58 (at 64-65)
Haji, A.M., 2016. Prevalence of the integration rule under parol evidence: the law. Without
Prejudice, 16(6), pp.34-35.
Hutton v Warren (1836) 1 M & W 466; 150 ER 517.
Mercantile bank of Sydney V Taylor (1891) 12 LR (NSW) 252 (at 262)[2]
Nemeth v Bayswater Road Pty Ltd [1988] 2 Qd R 406.
Pym v Campbell (1856) 6 EI & BI 370.
Van den Esschert v Chappell [1960] WAR 114
Van den Esschert v Chappell [1960] WAR 114,
Wahana, P.S., 2018. Parol Evidence Rule Doctrin As The Limitation For The Parties In
Submitting Evidence Before The Court. Yuridika, 33(3), pp.417-438.