Introduction
In this essay I will deliberate the legal rule which is parol evidence rule. Additionally provide
a detailed explanation of the rule and deliver cases which applied this rule. Furthermore I will
discuss the exceptions of the rule and also discuss the legal view of collateral contract and how is it
associated to parol evidence rule. Finally I will give a conclusion on the basis of the discussion of
parol evidence rule, the exceptions of the rule and collateral contract with their respective cases
whether Australian courts deliver remedies to breach of the verbal promises, when the promise was
not enclosed in the written contract.
Body
Parol evidence rule can be applied when parties put down their agreement into writing. In
that written document if the parties included their terms and accounts of transaction and it is
written as a whole, than extrinsic evidence which could be either verbal, oral or previous bargains
that possibly will alter, vary or add to terms of the written document will not be acceptable .1
However when two parties come together, they have intentions to make an agreement so they
decided and agree on their terms, later they would spend time and funds to create that agreement
into a written contract. Where by this contract will contain all the agreed aspects that can include
dos and the don’ts, the way of payment and other relevant terms.2 The rule is applicable only when
the contract or the selected portion of it is in writing.3 A’er all this preparation the le’ out terms in
the contract should not be considered.4 This is a straight forward principle which everyone comes
across in their daily lives while making contracts of buying cars, properties, insurance products and
many other examples were by the buyer and the seller agree on their transaction and make a
contract.
Whereby if parties were permitted to change, supplement or deduct the terms than, there was no
necessity of having the contract initially.5 A conclusive and de*nite explanation of parol evidence
1 Clive Turner, Australian Commercial Law, (Lawbook, 24th ed, 2003) ch9; J. W. Carter, “The Parol Evidence Rule :
The Law Commission Conclusion”; David W. MchLauchlan, ‘The Inconsistent Collateral Contract’ (1977) 3 Dalhousie
Law Journal 136.
2 Paul Latimer, Australian Business Law (CCH, 21st ed, 2002) was cited in Asnicar v Mondo Consulting Pty Ltd.
3 J. W. Carter, “The Parol Evidence Rule : The Law Commission Conclusion”.
4 Joseph, Urquico, ‘Parol Evidence Rule’ (1930) 5 Notre Dame Law Report 303,304.
5 David Parker and Gerald Box, Business Law for Business Students (Lawbook , 2011) ch9, 147.
Chohanz
rule were given in some of the well-known cases, like Innes J had stated in the case of Mercantile
Bank of Sydney v Taylor,6 furthermore Lord Denman had stated in the case Goss v Lord Nugent7 and
last but not least Lord Morris has stated in the case of Bank of Australasia v Palmer.8
Application of parol evidence rule is evident in the case of Henderson v Arthur,9 Where the
plaintiD rents out a theater to defendant and agreed an annual lease of £2500, which was payable
quarterly in advance in cash. The plaintiD sued the defendant for the quarterly rent unpaid.
Defendant claimed that early oral agreement the plaintiD had accepted to receive the rent through
cheque rather than cash. The defendant paid through cheque and the plaintiD declined the cheque.
The courts applied the rule of parol evidence where by no extrinsic evidence could add or alter the
written contract, so the court neglected the oral agreement the term of the written contract had to
be followed.
There are benefit of the rule it helps to maintain the stability in law, whereby it will enable to
protect the party who brought down their agreement into written and the weakness of the rule is
sometimes leads to injustice when the extrinsic evidence isn’t allowed and diGculties may arise.10
In 1971 the House of Lords stated “general factual background evidence which is known by
the parties at the time of the contract and the aim of the contract was relevant, so it should be
acknowledged”.11 This statement was further explained by Justice Manson surrounding (extrinsic)
evidence should be acceptable if it’s known by their parties.12 Parol evidence rule has certain
