CONTRACT

LAW
Prepared by :
Sarah San LIA190501
Aisyah Mohaziz LIA190006
 What is the Parol
Evidence Rule? Explain
with reference to decided
cases.
PAROL EVIDENCE RULE
The parol evidence rule prohibits a person from adducing oral evidence where the terms of the
contract have been put into writing. In other words, where a written document exist as a recording of
the parties’ agreement, the court will not allow the parties to bring in extrinsic evidence to add to,
vary, or contradict the terms of the written document.

The rule aims to protect written contracts’ original content to maintain certainty and stability in
business dealings.
Rationale for Parol Evidence
Rule:
Chang Min Tat FCJ in Tindok besar Estate Sdn Bhd v Tinjar Co [1979] 2 MLJ 229, FC.

“If this contention so generally stated and understood [that the admission of parol evidence is that
not all terms had been incorporated in the agreement] had any foundation in law, then it would open
to any party to a litigation concerning an agreement to say that the agreement which is the subject
matter of the dispute, did not contain all the terms thereof and seek to introduce such terms or even
terms which might not even have been within the contemplation of the other parry. No agreement
would then be safe from being re-written by one party in a court of law.”
Statutory Authority of Parol
Evidence Rule
Evidence Act 1950 [Act 56]

Section 91:

When the terms of a contract… have been reduced by or by consent of the parties to the form of a
document...no evidence shall be given in proof of the terms of the contract…. except the document
itself….
Statutory Authority of Parol
Evidence Rule (cont’)
Evidence Act 1950 [Act 56]

Section 92:

When the terms of any such contract…. Have been proved according to section 91, no evidence of
any oral agreement or statement shall be admitted as between the parties to any such instrument or
their representatives in interest for the purpose of contradicting, varying, adding to or subtracting
from its terms.
Exceptions to Parol
Evidence Rule
provided under s.
92 of Evidence Act
INVALIDITY

Proviso (a) :
Any fact that may be proved which would invalidate any document or which would entitle any person to
any decree of order relating thereto, such as fraud, intimidation, illegality, want of due execution, want of
capacity in any contracting party, the fact that it is wrongly dated, want or failure of consideration, or
mistake in fact or law.

In other words

Any extrinsic evidence that could prove invalidity of contract. ( not meant for contractual obligation, made
under duress, mistake in law or facts, lack of consideration and etc)
Case : Pattle v Hornibrook [1897] 1 Ch 25

Defendant as landlord has set a condition orally that must be fulfilled by plaintiff before agreement
could be formed. Plaintiff executed the agreement without satisfying the condition. Thus, defendant
refused to go through with it and entered into contract with another person. Plaintiff sued defendant
for damages but defendant adduce the condition to the court.

Court held there was no contract as extrinsic evidence here proved condition which was a
consideration was not satisfied.
COLLATERAL CONTRACTS

Proviso (b):
The existence of any separate oral agreement, as to any matter on which a document is silent and
which is not inconsistent with its term, may be proved, and in considering whether or not this proviso
applies, the court shall have regard to the degree of formality of the document.

In other words

The existence of any separate oral agreement to address a matter that is silent in the document (so
long does not contradict the content of the document)

Case :
- Tan Chong & Sons Motor Co Sdn Bhd v Alan McKnight [1983] 1 CLJ 77, FC
- Tan Swee Hoe Coo Ltd v Ali Hussain Brothers [1980] 2 MLJ 16, FC
- Kluang Wood Products Sdn Bhd & Anor v Hong Leong Finance Bhd & Anor [1999] 1 MLJ 193
Case: Tan Chong & Sons Motor Co Sdn Bhd v Alan McKnight [1983] 1
CLJ 77, FC

The respondent bought a car from appellant on the guarantee provided by the appellant that the car
complied the regulations posited by Australian legislative. However it was found that the car did not
complied with said Regulation.Hence the appellant sued for breach of contract. The court allowed the oral
agreement set prior to the purchase. Appellant then appealed to Federal Court.

Federal court affirmed lower court’s decision that exception to parol evidence rule s.92 proviso (b) applied.
A separate valid oral agreement exist alongside the written contract.
SUSPENSION OF OPERATION OF CONTRACT

Proviso (c):
The existence of any oral agreement constituting a condition precedent to the attaching of any
obligation under any such contract , grant or disposition of any property, may be proved.

In other words

There is an oral agreement containing condition that is pertinent for the happening of the written
agreement.

Case :
- Tan Chong & Sons Motor Co Sdn Bhd v Alan McKnight [1983] 1 CLJ 77, FC
- Ganesan v Baskaran [1980] 2 MLJ 26, SC.
 Case : Ganesan & Anor v Baskaran [1980] 2 MLJ 26, SC

The appellants contracted in writing to buy land belonging to respondent and paid a deposit. There was
a restriction in the document that the title of the land could not be transferred without the consent of
the Ruler-in-council.
No consent form have been obtained in the end. The respondent applied for rescission of the contract
and the forfeiture of the deposit because the appellants had failed to complete the contract on time.
But previously, the respondent had orally agreed to be the one to obtain the consent of Ruler-in-Council.

Held, the evidence relating to the separate oral agreement was admissible under proviso(c) of s92 of
the Evidence Act 1950
SUBSEQUENT AGREEMENT

Proviso (d):
The existence of any distinctive subsequent oral agreement to rescind or modify any such contract,
grant or disposition of property, may be proved except in cases in which the contract, grant or
disposition of property is by law required to be in writing, or has been registered according to the law
in force for the time being as to the registration of documents.

In other words

When both party did an oral agreement after a contract is formed, to modify or rescind the terms in
the earlier contract. However, if by law required the contract to be in writing, then only another
written document could change the earlier contract.
Morris v Baron & Company [1918] AC 1

The parties sought to rescind their original agreement for sale or purchase of the quantity of woolen fabric by
way of a subsequent oral agreement. But later on, both plaintiff and defendant disputed against each other back
and forth regarding the original written contract and their mutual subsequent oral agreement of rescinding the
earlier contract. Plaintiff sued defendant for breach of contract and claim for quantum meruit. Whereas the
defendant claim for damages against plaintiff.

Court held that both parties could not claim remedy against each other as both the parties mutually
intended and agreed not merely to vary the original contract but to set it aside and substitute another for it, as
the two contracts are in conflict with each other. Thus both had actually breach the contract.

Exception:

Voo Min En & Ors v Leong Chung Fatt: the lease was for a period of 16 yrs and required by law to be in writing
and registered. After expiry of lease, respondent argued that there was an oral agreement for a new lease. The
oral evidence could not be adduced.
TRADE USAGE/TRADE CUSTOM

Proviso (e)
Any usage or customs by which incidents not expressly mentioned in any contract are usually
annexed to contracts of that description may be proved if the annexing of any such incident would
not be repugnant to or inconsistent with the express terms of the contract;

In other words

Therein exist any practice of custom, although not explicitly addressed in contract, it is usually
imported silently into the contract so long it is not inconsistent with the terms in the contract.

Scrutton LJ in Produce Brokers Co Ltd v Olympia Oil and Cake Co Ltd [1917] 1 KB 320 at p 330
provided the authority where one could use the custom as a dictionary to explain the words in the
contract. Whereby a ‘dozen’ in quantity is known to be 12, but a baker’s dozen is 13.
 Case : Hutton v Warren [1836] 1 M & W 466

Plaintiff is a farmer on defendant’s land. Defendant sent notice of end of tenancy (plaintiff is given time
to move out of the land) however requires the plaintiff to continue taking care of the cultivation on the
land while doing so).

Afterwards, plaintiff claim reasonable payment for the labour and expenditure bestowed on the farm,
and defendant refused to pay and contended the written agreement did not specified such matter.

Court held that as per local custom , the plaintiff is entitled to the fair allowance from the defendant as
upon notice of end of tenancy plaintiff could no longer benefit from the land, as such defendant must
provide fair payment to plaintiff for his hard labour upon defendant’s farm.
IMPLIED TERMS PROVIDED BY COURTS

Proviso (f):
Any fact may be proved which shows in what manner the language of a document is related to
existing facts.

In other words

Extrinsic evidence is permitted by the court in order to explain any ambiguities in the agreement.
Case : Yong Ung Kai v Enting [1956] 2 MLJ 98 (HC, Sibu)

Defendant entered into a contract with plaintiff. The contract was for the sale of timber on the land and
so plaintiff deposited a sum of money to defendant. However, one must obtain a licence from forest
department before cutting of timbers. Defendant did not managed to procure the licence and thus
plaintiff sued for breach of contract and claimed damages.

Court held that, allowing of external evidence showed that obtaining the licence is an implied term in
the contract in order to perform the agreement. As defendant was denied of licence, the contract is
now discharge out of frustration (impossible to continue without licence).
Exception not under
provision:
Promissory Estoppel
The rule against parol evidence varying a written contract does not exclude the operation of the doctrine of
promissory estoppel.
The purpose and rationale of each doctrine is different.

Chuan Hong Petrol Station v Shell Singapore Pte Ltd

In this case, promissory estoppel was not raised successfully however court affirm that promissory estoppel is
not confined under the parol evidence rule and should it be raised successfully, the contesting parties cannot
contend on the ground of parol evidence rule.
Questions?

Thank you~