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The Parol Evidence Rule Of Australia


Task: Write an essay on The “Parole Evidence Rule” according to the Contract law of Australia.


This essay will carry out a discursive analysis of the “Parole Evidence Rule”, based on the Contract Law of Australia. Before venturing into the core discussion, it is imperative to gather a conceptual understanding of the “Parole Evidence Rule”. As per the understanding developed by the Contract law of Australia, by the virtue of this rule, the parties engaged by a written contract are prevented from tampering with the evidences and disclosing them, while adding clarity to the written terms of contract and eliminated any kind of ambiguity (Ayres). Therefore, the contract thus made is legally comprehensible and transparent between both the parties. It is to be noted that the Contract Law of Australia was essentially rooted from the Common Law System of English some of their statutory specifications are functional in Australia as well. It was in 1980s that the Contractual laws were amended by the Australian parliament (Botero, David and Echeverry).

Conceptually, the word “Parole” is derived from the Anglo-Norman and legal French terms. The term was, in fact, derived from the Latin term ‘parabola’, signifying ‘speech’. The fundamental of the written contract is based on the rational that the parties involved in the agreement should be legally bonded to one another in terms of their mutual understanding as well as in writing (Carlin). It has been critically defined that the contracting parties should not deviate or there should not be any deviation in the final understanding while the agreement is being carried out in writing or is being interpreted (Dyani, Ntombizozuko and Mtendeweka). Even when the contracting parties decide to move out of the agreement, it should not leave an impact on the written contract neither would it change the terms and interpretation of the legally documented agreement. In order words, it is understood that the evidences derived and understanding consented prior to the documentation of the contract should not prove contradictory to the written agreement (Emerson). In fact, it is legally believed that in order to effectuate a contract it is imperative that the agreement, mutually consented by the contracting parties, should be documented. Based on the Court Judgement, it is termed as the Final agreement that is effective in terms of law and is ultimately abiding on both the parties. Furthermore, the core contention of the parole evidence rule implies that the parole evidence cannot, in any condition, contradict a final agreement that has been documented between the contracting parties. But it can, however, supplement a course of dealing between two parties.

It is also imperative to understand the critical approach implemented in the parole evidence and how the same is operant in the legal perspective. The principle objective of the parole evidence, it has been elaborated, is to clarify the rules and discuss the manner in which it would be implemented in various territorial parts of Australia. It is to be noted that the rule of Contact law in Australia had been the bone of contention for ages and had given rise to several controversial issues (Epstein, David and Timothy). It has been generally agreed that the constitutional formulation of the Australian contract law adopt an objective approach in terms of contracting and it has been made clearly stated that the parole evidence rule has been the center of controversy in Australia for several times. In spite of the objective approach adopted in developing the contracting laws in Australia, the parole evidence rule supporters have voiced their concern in the recent times urging whether a law should be formulated making the parole evidence a proper statue or should be implemented to make a regular usage. In fact, in the light of the current context, it is to be noted that the parole evidence gained importance ever since the popular case of Codelfa Construction vs the State Railway authority of the New South Wales. The judgement of this case was passed in 1982 (Epstein, David and Adam). It is understood from the given case that the state railways authority of the New South wales had signed a contractual agreement with the Codelfa Constructions. By the virtue of the agreement, it was mutually consented between the contracting parties that the Codelfa construction would be responsible for the construction of two tunnels in Sydney for the railway network development. The blueprinting of the plan was completed several months in advance. It was also reported that the Codelfa Construction was given a certain period of within which they were supposed to complete the construction activities. Based on the estimate date a date was finalized between both the parties. As per the deadline the Codelfa constructions had started off their work in no time. They arranged for three shifts of work per day and it consequently gave rise to local problems. An injunction was soon declared against the construction company. Accordingly, the company had to stop their third shift of work temporarily. It was decided that the construction sites would minimize the noise pollution between 10 pm to 6 am. Therefore, the Codelfa construction was forced to levy extra charges on the contracting railway authorities of New South Wales to abide by the changes of the revised work schedule of the company. Therefore, it is understood that the primary changes in the Codelfa Construction Vs. the State Railway Authority demand a revision and a clarification of the contractual terms documented between the contracting parties. However, as a part of the judgmental procedure Judge Mason had critically discussed the importance of the parole evidence rule (Kee, Christopher and Elisabeth). Therefore, it is understood that it is one of the most important cases in Australia that dealt in parole evidence and had gained a new degree of importance in the legal context. Therefore, in the course of preparing his judgement of the said case, it has been reported that Justice Mason had critically examined the parole evidence. He had clearly stated that on the broader perspective, extrinsic evidences should not be included in the parole evidence rule. He further elaborated this this rule included all the direct statement in the form of negation and intention, which were contradicted, added, eliminated or distorted to the documentation of the written agreement (Marcus, Paul, and Vicki). Therefore, the aforementioned clarifications made on the importance of the parole evidence was clearly codified and was henceforth made applicable in all the Australian Court of law as well as in the American Courts.

On the other hand, it is to be noted that the said clarification appeared to be fundamentally different on being compared to the objective approach to the contracting rules of Australia. It has been pointed out that the primary difference consisted in the fact that the parole evidence rule in Australia made exception of the evidences that inherently related to the circumstantial situation of a context. Therefore, it is to be noted that while developing his judgement, Justice Mason referred and adopted the simplistic approach and interpretation of the Australian Contract law that categorically eliminated the use of additional evidences whatsoever for the court use, if the contractual terms were clear and definite. However, in spite of the apparent criticism it must also be noted that Justice Mason had further elucidated that in the course of his elaboration that by the virtue of adopting a simplistic approach it would be necessary to admit and accept other additional evidences, particularly in a contract, the formation of which is based on the other situational factors. Therefore, it is imperative to interpret those situational parameters in order to analyze the potential contradiction and uncertainties that might be created in the same contractual terms in the later period (McCormick). The American courts have, however, expressed their concern over the permission of the parole evidence stating the admission of the parole evidence allows spaces for the creation of uncertainties. It implies that this permission would give rise to multiple meanings to the contractual document and make it practically difficult for the court to arrive at any definite judgement. It has also been noted that the American approach becomes irrelevant and unnecessary for the objective contractual approach in Australia. This is because in the judgement of the aforementioned case, the court would be deciding on the relevant interpretation of the situational dilemma and what steps a reasonable man might have taken in the given situation and not just rely on the documented contractual terms and the contractual interpretation of the parties (Mohamed).

From the historical perspective, it could be contented that in the 20th Century, the the English and the Australian Courts have explained that a Court is capable of elucidating, explaining, and interpreting a contract, without any reference to the external situation pertaining to the contract formation. The House of Lords in 1971 had further added that the contracting parties would be executing their evidences based in their intentions. This evidence was irrelevant to the core structure of the contract. Most importantly, the contract shall be excluded from its general situational background that existed when the involved parties documented the contractual terms. Therefore, by the virtue of the implication it is meant that court is eliminate any contractual terms that was not a part of the contract. The court will, however, interrogate the involved parties about their intention and the changes it might have made to the situation, had it been a part of the written agreement. In the light of this context, Justice Mason had highlighted upon the fact that these contractual terms would be included as an important part of the parole evidence and only when it has been satisfactorily determined that the contracting parties are aware of the facts (Naylor, Brownwyn and Johannes). In regard to this context, it is to be understood that the evidences that were earlier considered permissible, and were founded upon the factual backdrop of the evidences, will not be treated anymore as a part of the evidences. On the contrary, the evidence would be referred to and would be addressed only if the contracting parties were acquainted with facts and terms of the case and the evidences in question. Nothing else shall be considered as a part of the evidence until and unless it was a documented clause in the written agreement (Ostendorf). This is also known as the objective theory of the contracting rule By the virtue of this rule, it was contended that the intention of the contracting parties would be taken into consideration. This implied it would be analyzed whether the intention of the contracting parties hold true and relevant to the given case. Besides the most important part of the case centered around the objectives of the involved contracting parties. Therefore, the Court of Australia based on this approach, had to admit the validity of the background information as an evidential force that had be accepted by the court. It is furthermore contended that the court would interpret the contractual terms and clauses in a manner, in a same way, it had been interpreted and perceived by the contracting parties, without any relation to the parole evidence rule. In light of this matter, Judge Mason might be quoted, elaborating on the objective rule (Joseph): “There may perhaps be one situation in which evidence of the actual intention of the parties should be allowed to prevail over their presumed intention. If it transpires that the parties have refused to include in the contract a provision which would give effect to the presumed intention of persons in their position it may be proper to receive evidence of that refusal. After all, the court is interpreting the contract that the parties have made and in that exercise the court takes into account what reasonable men in that situation would have intended to convey by the words chosen. However, is it right to carry that exercise to the point of placing on the words of the contract a meaning which the parties have united in rejecting? It is possible that evidence of mutual intention, if amounting to concurrence, is receivable so as to negative an inference sought to be drawn from surrounding circumstance.”

The subjective theory of contracting law has been adopted by Justice Mason at time. The law notes the importance of abiding by the contractual terms and conditions. It has been observed that there is seemingly nothing wrong in what the subjective theory posits. This is because of the way in which the jurisdiction is more interested in following the objective theory while performing the contractual analysis. Understandably, the reason behind Justice Mason’s inclination towards following the objective view of the contract can be noted.

Apart from the above noted reason, there are others as well that support Justice Mason’s predisposition towards following the objective theory; the most important being the way in which he understands the role of the court. According to Mason, the Court would unfairly treat the parties if it rejects their intentions failing to understand the perspectives of the parties in the first place. In America, however, completely different set of views govern the understanding of contracts in laws. In America, terms and conditions as laid out in Contracts are considered as being more important than the intentions projected or exhibited by the parties. Therefore, it would not be wrong to consider that in Australia preference is given to following objective theories and the hypotheses thereof.

This essay provides rather a neutral point of view. That is to say that the discussions in this essay would not be developed by considering either of the objective or subjective theories of contracts and how they might impact the parole evidence. As such, both the theories can be considered to support the appropriate form of the contract making (Pichhadze).

The objective theory understands how the parties generally are more likely to do something different from what has been defined in the contract. This is usually done in order for the party to achieve a particular goal that is different from that which is defined in the contract. The social realm is generally not considered in so far as the formality of the contract following is concerned. The contract is viewed mostly as written evidence that does not necessarily have to be a record that is reliable as well as long lasting. This contract between the two parties often acts as a form of agreement that is followed in order to adhere to a particular social action. The relationships between the non-inmates are defined by the formalization of the contract. Moreover, in order to understand the limitations of the contract the same is drawn upon certain criteria which are followed within the limitations of how disputes can be resolved. The contractual relationships are decided upon the predictability of the clauses that have been defined. These clauses and practices are developed by noting how the contractual relationship can be considered to be viable. The interpretation therefore becomes critical. This is because the objectivity of the judgment would be governed by the way in which the interpretation of the contract would be made. As such, in this context, the relationships among the parties are not as much important as the form of the contract (Schauer). The main idea for the interpreter is to understand how the contractual behavior can be regarded or supported by the activities of the public.

The role of the actors becomes important in so far as the comparison between the subjective and objective theories of contract rules is concerned. The people can be noted as the main actors who would be impacted by the various ways in which social integrations of the contract formation might be influenced. The parole evidence plays the most important role of understanding the least number of agreements that has to be followed in order to be applicable. The presumptions would generally not be in line with the changes that the parties ought to make in order for the background of the case to be developed. Intent becomes important in considering the objective and subjective ways in which contract laws can be defined. The changes would have to be made by understanding the intentions of the actors who are made part of the contract. Agreements between the family members as well as those who are considered to be personally close need not be avoided. This is important in so far as the agreement plays a crucial role in defining the personal relationships. The personal contract that is important to be developed need to be understood in terms of how the family members define their own positions. This would be important in order to define the contracting behavior of the actors who are made part of the contract development

The Parole evidence rule does not follow the consideration of the outside evidence that is generally used in order to understand how certain rules of the Contract can be defined within the rule that is followed by the contracting parties. The identification and construction of the various roles that are defined within the Evidence rule become important in so far as the contract is clarified in terms of the changes that are required to be made. The main purpose of the parole evidence rule is to restrict the consideration of previous agreements that might have been used in order to understand how the existing contract can be defined by following the form of the contract.

Extrinsic evidence stands for any form of evidence that cannot be admitted or considered while noting the limitations of the parole evidence or the contract. The extrinsic evidence comprise of evidence that are gained through writing and consist of letters and drafts that might have been developed in earlier stages of the negotiation process. The parole evidence rule considers such extrinsic evidence as not being important to the overall contract (Schiavo). The rules of the parole only focus on the contract that has been made or developed in writing. The terms and conditions of the parole are also considered as being important in clarifying the problems and vagueness that might be present in the contract. As such, the whole intention is to not pay attention to the criteria that are not present within the scope of the contract.

Ayres, Ian. Studies in Contract Law. Foundation Press, 2012.

Botero, David Augusto Echeverry. "Contract Interpretation Law in Australia: It Is a Maze, Not a Straight Way."

Carlin, Tyrone M. "Rise (and Fall) of Implied Duties of Good Faith in Contractual Performance in Australia, The." UNSWLJ 25 (2012): 99.

Dyani, Ntombizozuko, and Mtendeweka Mhango. "Pension death benefits under the Malawi Pension Bill 14 of 2010: reflections from South Africa and Australia." The Comparative and International Law Journal of Southern Africa(2012): 18-41.

Emerson, Robert W. "Franchising and the Parol Evidence Rule." American Business Law Journal 50.3 (2013): 659-728.

Epstein, David G., Adam L. Tate, and William Yaris. "Fifty: Shades of Grey-Uncertainty About Extrinsic Evidence and Parol Evidence After All These UCC Years." Ariz. St. LJ 45 (2013): 925.

Epstein, David G., Timothy Archer, and Shalayne Davis. "Extrinsic Evidence, Parol Evidence, and the Parol Evidence Rule: a Call for Courts to Use the Reasoning of the Restatements Rather than the Rhetoric of Common Law." NML Rev. 44 (2014): 49.

Kee, Christopher, and Elisabeth Opie. "The principle of remediation." Sharing International Commercial (2012).

Marcus, Paul, and Vicki C. Waye. "Australia and the United States: Two Common Criminal Justice Systems Uncommonly at Odds Part 2." Tulane Journal of International & Comparative Law 18.2 (2010): 09-78. McCormick, P. "Law reform."

Mohamed, Shair. "A critical appraisal of the parol evidence rule in contract law." Proceedings of SOCIOINT14: International Conference on Social Sciences and Humanities. International Organisation Centre of Academic Research, 2014. Naylor, Brownwyn, and Johannes Schmidt. "Do Prisoners Have a Right to Fairness before the Parole Board." Sydney L. Rev. 32 (2010): 437.

Ostendorf, Patrick. "The exclusionary rule of English law and its proper characterisation in the conflict of laws–is it a rule of evidence or contract interpretation?." Journal of Private International Law 11.1 (2015): 163-183Perillo, Joseph M. "Donee Beneficiaries and the Parol Evidence Rule." . Thomas L. Rev. 26 (2013): 496.

Pichhadze, Amir. "Can, and Should, the Parole Evidence Rule Be Invoked by or Against Tax Authorities in Tax Litigation? Distilling Lessons from US Jurisprudence." Bulletin for International Taxation 67.9 (2013): 474-490. Schauer, Frederick. "On the Relationship Between Legal and Ordinary Language." Speaking of Language and Law: Conversations on the Work of Peter Tiersma (2015): 35.

Schiavo, Frank L. "Alternative Approach to the Parol Evidence Rule: A Rejection of the Restatement (Second) of Contracts; Mitchill v. Lath Revisited, An." Cap. UL Rev. 41 (2013): 759.


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