At In The Know Legal, we teach you what your contract is, what it does, what the language means, how to customize it, and what the important next steps are. But there are a lot of things that happen before you enter into a contract, and we want to talk about some of that.
Negotiations and communications before entering into the agreement called “parol evidence.”
Now, you may be wondering why I am talking to you about anything that has to do with parol. Don’t worry, this isn’t crime and punishment we are talking about – “parol” is actually a French word that literally means “word or speech.” While originally referred to verbal speech, in medieval times, it was also used to refer to legal pleadings. So, the word “parol” actually refers to both verbal and written correspondence. In law, we use it to refer to words and correspondence outside an Agreement.
The Parol Evidence Rule limits the extent to which discussions or writings made prior to, or contemporaneous with, the signed written contract can be admitted and considered a part of the signed written agreement.
A totally integrated agreement, which is considered a final expression of the written agreement, is something that is intended (and therefore assumed) to include all the details agreed upon by the parties. It is not, for example, a proposal you send out to your client or your email discussions.
So, all the stuff you say prior to, or at the same time as, signing that totally integrated agreement cannot be used to contradict or supplement any terms in the agreement.
We need examples. I know.
Let’s say I agree to make a custom chocolate cake for you and deliver it to you on May 1st. You agree to pay me $50 for the cake. Now, let’s say I deliver the cake and you don’t pay me (I wouldn’t pay me either because I cannot make chocolate cake, as I leave that to co-founder Lisa’s, one of her many talents).
Well, now I not only demand my $50, but I also want a $25 late fee since you didn’t pay me on time. But if my contract said nothing about a late fee, then any evidence of that late fee (such as in an email when we negotiated the price and delivery) is parol evidence. We may have chatted about a late fee over email, but it wasn’t in the agreement. So, too bad – no late fee for me.
Let’s put this in a services contest. What if I were a business Coach and in our negotiations I say, “Between our sessions you can contact me any time, send messages by courier pigeon, Pony Express, whatever.” But the contract says “There will be absolutely no communication between Coach and Client between sessions; Client may not communicate with Coach outside of sessions. “ Well, a fully integrated agreement erases everything that was said before signing, and you won’t be able to bring in evidence of that prior discussion. So, cancel those pigeons and ponies.
The moral of the story: If you wanted as part of your agreement, it should be in the agreement.
There are some exceptions, however. If there is an actual defect in the contract, you can bring in evidence of that defect. Or if the contract does not take effect unless some condition is met (I will only buy birthday cake from your store on Saturday if you have chocolate cake delivery that day), then those prior discussions can come in.
Because, while we don’t want anything to change an existing agreement, we WILL allow evidence that shows that the agreement itself is defective. For example, if I duped you into signing a contract with language that I hid, that is fraud, because but for my duping you, you would not have entered into that contract. Absent fraud, mistake, illegality, or a few other conditions, we assume the parties to the contact are of equal bargaining power and can read what it states and understand what is and is not in the contract.
Now, don’t get parol evidence confused with stuff that comes after you enter into a contract. That is different, that is called a modification, which, in fact, is addressed by one of our templates, an Amendment to a Services Agreement. Modifications are allowed, and happen when circumstances change in which the actual performance due under the agreement changes – like the scope of services or the price involved with the new scope of services. This happens and is normal. You just want to make sure it is clearly spelled out whether you require the modification to be in writing, and whether both parties have to agree to it.
So, there is a little contract law to help you understand the before and after of your contract.
I hope you enjoyed this blog, and that you feel a bit more In the Know.