As some of the HTF readers may have noticed, the articles in the Legal Matters corner, or as I would like to call it “…Let’s Kill All the Lawyers,” have become steadily and increasingly esoteric. Well, that’s because I am running out things that the editors will let me write, so we have to dig deeper.

So, here is a rule you probably do not know—the parol evidence rule. “Parol” means by mouth or something stated or declared. This rule is a rule in contracts, which “prohibits the admission of extrinsic evidence of prior or contemporaneous oral agreements, or prior written agreements, to explain the meaning of a contract when the parties have reduced their agreement to an unambiguous integrated writing.” Thus, when a party tries to admit evidence that varies, contradicts, or alters the final written agreement, either orally or by previous writing, it is inadmissible in court.

For example, say you entered into negotiations to buy a new car from a dealership. During the negotiations, the car salesman states, “if you send me two new customers that each buy a car from me within a year, I will send you a $2500 check.” You agree and buy the car. In the purchase agreement for the car, the extremely small, barelylegible type makes no mention of the $2500 agreement. You sign the contract and drive off. Next, you follow through and send your two friends to purchase cars, and they actually purchase the cars. A few weeks go by and you never hear anything from the dealership or receive your check. When you call the salesperson and ask for your money, he says, “well, we can’t do that now, and it’s not in the contract.” (On a side note, the purchase agreement that you signed probably disclaimed all other provisions made outside of the contract.) You state, “I relied on your statement, took you at your word, and held up my end of the bargain.” You sue the dealership.

The parol evidence rule is designed to limit litigation. Arguably, the purchase agreement is the final writing, and if so, then statements made in negotiations or drafts of previous purchase agreements are inadmissible. The dealership wins. If the salesperson had called three days after you signed the purchase agreement and made the offer regarding the referral fee, then that would be a separate and enforceable contract, but under these circumstances, the parol evidence rule would bar the admission of the salesperson’s statements.

Therefore, all negotiated terms must be in writing and integrated into the contract in order for you to make a claim that the other party breached a term. If you are dealing with a form, then take out a separate piece of paper and write down any additional terms and have the other party sign. Don’t be afraid to add provisions and cross out words in a form contract. It doesn’t need to look pretty in order to be binding.

Erik J. Honkanen, Law Office of Erik J. Honkanen, S.C., U.S. Bank Plaza, 230 1st St. South, STE 101, Virginia, MN 55792, 218- 749-3047, erik@honkanenlaw.com.