Sunday, 4 March 2012

The Rationale of Parole Evidence Rule

Justice VK Rajah, judge of the Court of Appeal in the speech on the Redrawing the Modern Boundaries of Contractual Interpretation once had said that “Fairness should trump convenience because contract law is a facilitative body of principles”. Justice VK Rajah, in the other words stressed on the departure from relying only onto the text thus made efforts to go to the context. The principle if an agreement is reduced into writing, it can be overturned by oral evidence, it does not change the interpretation but limits the interpretation to reflect fairness.

The parole evidence rule is a fundamental rule of substantive law ‘resting on a rational foundation of experience and policy’ and is essential to the certainty and stability of written obligation. It is therefore agreed that the parol evidence rule is a rule of a substantive law and not exclusionary rule of evidence.[1]

The parole evidence rule is the fundamental premise of contract law. Generally, if there is evidence in writing such as a signed contract, then the terms of the contract cannot be altered by evidence of oral agreements which purporting to change, explain or contradict the written document. Basically, the purpose of the parole evidence rule is to give legal effect to whatever intention the parties may have had to make their written contract a final and perhaps also a complete expression of their agreement. 
           There are many reason lies behind of the implementation of the parole evidence rule. The intends of the parliament is to ensure that contract enter by both party are in writing. It is because documentary evidence can be regarded as a conclusive evidence of the party’s consideration. Thus, make it easier to prove the existence of a contract as it is documented. The parole evidence rule portrays the real intention of parties by establishing the true intention of the parties. Apart from that, parole evidence rule definitely increase the level of certainty in relation to the basis on which parties have reached agreement.

The main rational of parol evidence is to bring clarity to justice. Parole evidence rule may show that an unambiguous term in the contract is in fact a mistaken transcription of a prior valid agreement. Such a claim must be established by clear and convincing evidence, and not merely by the preponderance of the evidence. it is therefore may resolved an ambiguity in the contract. By referring to the proviso (e) of section 92 of the Act, it has clearly mentioned that, if there is an ambiguity of the language, any other documents are relevant to be tendered. In addition, parol evidence rule may brings clarity by showing that in light of all the circumstances surrounding the making of the contract, the contract is actually ambiguous, thus necessitating the use of extrinsic evidence to determine its actual meaning. For instance, in the case of Kluang Wood Products Sdn Bhd & Anor v Hong Leong Finance Bhd & Anor[2], by applying the parol evidence rule, the judge has considered the nature of the written agreement and its csurrounding circumstances.

Moreover, the rational of parol evidence rule is to bring finality. A final integrated agreement is either a partial or complete integration. If it contains some, but not all, of the terms as to which the parties have agreed then it is a partial integration. This means that the writing was a final agreement between the parties (and not mere preliminary negotiations) as to some terms, but not as to others. For the evidence rule to apply, the written contract must be a final writing. This means the court must believe that both parties to the contract intended it to be a final representation of their agreement, and not just a draft or a contract still under negotiation. It can be a final, complete integration which means  it is the final embodiment of the total agreement between or among the parties, or it can be a final. While partial integration means, it's the final embodiment of part of the total agreement between or among the parties. If the contract is not the final expression of the parties' agreement, whether partial or complete, the parol evidence rule does not come into play and extrinsic evidence may be introduced.

On the other hand, the parole evidence rule is ostensibly designed to promote certainty and stability in commercial transactions by insuring the legal enforceability of written contracts. Through the analysis of parol evidence rule, we will find that the existence of the rule rests upon two basics premises which are the written evidence is more accurate and reliable than the ability of human memory or any other oral statement to detail the terms of contractual aggrements and that where contracting parties have set their agreement down in writing it is only reasonable to assume that they have included therein every material term and circumstance. Both of these premises and the resulting policy decision to afford legal protection to written contracts have their roots in the common law belief in certainty form and the concomitant fear that the judicial process will be compromised by the unrestricted introduction of oral testimony. The case of Tan Chong & Sons Motor Co. (Sdn) Bhd v Alan Mc Knight[3], the judge indeciding the case has applied the parol evidence rule where, the existence of any seperate oral agreements to any matter on which a document is silent and is not consistent with its terms.

Besides, the rational of parol evidence rule is to avoid mistake and harshness to justice. By applying this evidence rule, any wrongful conduct such as misrepresentation, fraud, duress, unconscionability or illegal purpose on the part of one or both parties may be revealed. Thereto the injustice towards the parties may be denied and the truth of consideration will prevail. For instance, if the contract states that A has paid B $1,000 in exchange for a painting, B can introduce evidence that A had never actually conveyed the $1,000.
          The parliament in enacting the parole evidence rule and its exceptions under chapter VI of the Evidence Act purposely with good reason as they can foresee the situation such as dispute as to the contract or agreement are likely to arise. As a matter of fact, in order to avoid such kind of conflict which reasonably can arise, the Parliament of Malaysia enacted Parole Evidence as there a various legal issue can be tackle by such enacted provision provided under the Evidence Act.
         If the exceptions to the parole evidence rules is not expressly enunciated in Malaysian law then evidence on oral agreement such as testimony about what was said during contract negotiations, proposals or letters memorializing conversations which is relevant and material important to the contract cannot be affected thus become an evidence that can be implemented. This is due to the fact that parole evidence is not part of the contract. As a result, it is not admissible to explain the meaning of any contract term or explain what the parties meant or intended to do under a contract. From the above illustration, such situation or scenario can be avoided by the inclusion of the parole evidence rule into Malaysian’s law. In addition, by the law on parole evidence, we will be able to explain that the written contract itself did not accurately express your agreement because it has not been considered in parole evidence.

In practice, the parole evidence rule can also cause harsh consequences for the unwary as it tends to allow either party to say things to roofing their own statement of claim and not be bound by their statements. However, it is a fair rule that allows parties to know their rights and obligations with regard to a contract.

[1] Schwartz v Zaconick, 68, So
[2] [1999] 1 MLJ 193 FC
[3] [1967] 1 MLJ 123

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