Tuesday, 7 January 2014

Verbal Agreements versus Written Agreements -- Legal Principles

What happens if a verbal agreement conflicts with a written agreement?

By Anthony Pranata, Barrister & Solicitor

January 6, 2014

First and foremost, all contracts in Canada are subject to what is known as the “parol evidence rule”. The parol evidence rule generally bars extrinsic evidence (ex. things that are verbally expressed between two parties) that would alter the meaning of a written contract.

When the written contact is clear, the parties' intention is to be derived primarily from the words they have used in the contract. Evidence of context cannot be allowed to contradict those words.

For example, if you enter into a written contract with another person to sell your car to him for $10,000.00, he cannot turn around and say that, after you two signed the agreement, you verbally agreed that you would sell him the car for only $9,000.00 because the power windows do not work.

However, let’s say that the written contract stated that the price of the car is either $10,000.00 if the power windows work or $9,000.00 if the power windows do not work. And let’s say that the windows only roll down half way. Does this mean that the power windows do work or do not work? Obviously you are going to argue that the windows do work because they do in fact go down, but the buyer is going to argue that the power windows do not work because these windows can only be rolled down halfway.  In this case, the written contract is ambiguous because it does not describe in detail what a “working power window” entails. Since the written contract is reasonably susceptible to having more than one meaning, extrinsic evidence would be admissible in a court of law to try to describe what you and the buyer meant by a “working power window”.

There are other exceptions to admitting oral evidence to vary a written contract, but in general:

a)      Extrinsic evidence cannot be used to interpret a contract if the contract is clear and unambiguous.

b)      Extrinsic evidence may be used to interpret a contract if the contract is ambiguous.

c)       Extrinsic evidence on an issue that is silent in the original written contract will be accepted by a court of law. In this case, provided that the extrinsic evidence satisfies all the legal requirements for forming a contract, the extrinsic evidence simply becomes a collateral contract (a second contract in addition to the original one).

For more information, please contact the law office of Courtney Aarbo Fuldauer LLP, Lawyers.

Anthony Pranata
Barrister & Solicitor
Anthony's bio: http://www.courtneyaarbo.ca/pranata.php
Anthony's email: apranata@courtneyaarbo.ca

*The information contained in this blog is not legal advice. It should not be construed as legal advice and should not be relied upon as such. If you require legal assistance, please contact a lawyer*

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