Parol Evidence Rule

PAROL EVIDENCE RULE

Meaning of the Rule

When the terms of an agreement have been reduced to writing, it is considered as containing all the terms agreed upon and there can be, as between the parties and their successors-in-interest, no evidence of such terms other than the contents of the written agreement. (Sec. 10, Rule 130, ROC, as amended)

NOTE: Among the evidentiary rules, it is the parol evidence rule that has direct application to the law on contracts. The rule applies only to contracts which the parties have decided to set forth in writing. Hence, parol evidence does not apply to oral contracts. (Riano, 2019)

Parol Evidence

It is any evidence aliunde (extrinsic evidence) which is intended or tends to vary or contradict a complete and enforceable agreement embodied in a document (Regalado, 2008). It may refer to testimonial, real, or documentary evidence.

NOTE: Parol evidence is evidence outside of the agreement of the parties while the parol evidence rule prevents the presentation of such parol evidence.

Rationale for the adoption of the Parol Evidence Rule (2009 BAR)

When the parties have reduced their agreement in writing, it is presumed that they made such writing as the repository of all terms of the agreement, and whatever is not found in the said writing must be considered as waived and abandoned. (Tan, 2010)

Under the Rules of Court, the written agreement is already “considered to contain all the things agreed upon.” If this be so, the written agreement already represents the final expression of the agreement of the parties on the subject. Being the final agreement, any extraneous or “parol” evidence is inadmissible for any of the following purposes: (a) modify, (b) explain, or (c) add to the terms of the written agreement. (Riano, 2022)

Condition Precedent and a Condition Subsequent established by Parol Evidence

Condition precedent may be established by parol evidence because there is no varying of the terms of the written contract by extrinsic agreement. There is no contract in existence so there is nothing in which to apply the excluding rule. (Land Settlementand Development Corporation v. Garcia Plantation Co. Inc. andor Salud Garcia and Vicente B. Garcia, G.R. No. L-17820, 24 Apr. 1963)

Meanwhile, conditions subsequent may not be established by parol evidence since a written contract already exists. (Sps. Sabio v. The International Corporate Bank, Inc., G.R. No. 132709, 04 Sept. 2001)

NOTE: The present rule now requires that the admissibility of subsequent agreements be conditioned upon its being put in issue in a verified pleading. (Sec. 10, Rule 130, ROC, as amended)

Requisites for the Application of the Rule

1.      There must be a valid contract;

2.      The terms of the agreement must be reduced to writing. The term “agreement” includes wills;

3.      The dispute is between the parties or their successors-in-interest; and

4.      There is dispute as to the terms of the agreement.

Parties should be Privies to the Contract

The parol evidence rule does not apply, and may not be properly invoked, by either party to the litigation against the other, where at least one party to the suit is not a party or privy to the written instrument in question and does not base a claim or assert a right originating in the instrument of the relation established thereby. Thus, if one of the parties to the case is a complete stranger to the contract involved therein, he is not bound by this rule and can introduce extrinsic evidence against the efficacy of the writing. (Lechugas v. CA, et al., G.R. Nos. L-39972 & L-40300, 06 Aug. 1986)

Application of the Rule to Wills

The parol evidence rule applies to agreements, i.e., contractual obligations. However, the term “agreement” includes wills. Therefore, there can be no evidence of the terms of the will other than the contents of the will itself. (Riano, 2019)

NOTE: While parol evidence applies to wills, an express trust concerning an immovable or any interest therein may not be proved by parol evidence. (Art. 1443, NCC)

Exceptions to Parol Evidence Rule

A party may present evidence to modify, explain or add to the terms of the written agreement if he or she puts in issue in a verified pleading the following: (F-I-V-E)

1.     Failure of the written agreement to express the true intent of the parties thereto; (2001 BAR)

2.     Intrinsic ambiguity, mistake or imperfection in the written agreement;

3.      Validity of the written agreement; or

4.      Existence of other terms agreed to by the parties or their successors in interest after the execution of the written agreement. (Sec. 10, Rule 130, ROC, as amended)

Mistake

The mistake contemplated is one which is a mistake of fact mutual to both parties. (Gurango v. IAC, G.R. No. 75290, 04 Nov. 1992)

Even when a document appears on its face to be a sale, the owner of the property may prove that the contract is really a loan with mortgage by raising as an issue the fact that the document does not express the true intent of the parties. In this case, parol evidence then becomes competent and admissible to prove that the instrument was in truth and in fact given merely as a security for the repayment of a loan. (Madrigal v. CA, G.R. No. 142944. 15 Apr. 2005)

Kinds of Ambiguities

Failure of the Written Agreement to Express True Intent of the Parties

Parol evidence may be admitted to show the true consideration of the contract, or the want or illegality thereof, or the incapacity of the parties, or the fact that the contract was fictitious or absolutely simulated, or that there was fraud in inducement. (Regalado, 2008) Despite the meeting of the minds, the true agreement of the parties is not reflected in the instrument. (Riano, 2019)

NOTE: In an action for reformation of instrument under Art. 1359 of the Civil Code of the Philippines, the plaintiff may introduce parol evidence to show the real intention of the parties. An action for reformation presupposes that a meeting of the minds exists between the parties, i.e., there is a contract between them although the instrument that evidences the contract does not reflect the true agreement of the parties by reason of, for instance, fraud or mistake. (Riano, 2019)

Q: Paula filed a complaint against Lynette for the recovery of a sum of money based on a promissory note executed by the latter. Paula alleged in her complaint that although the promissory note says that it is payable within 120 days, the truth is that the note is payable immediately after 90 days but that if Paula is willing, she may, upon request of Lynette give the latter up to 120 days to pay the note. During the hearing, Paula testified that the truth is that the agreement between her and Lynette is for the latter to pay immediately after 90 days’ time. Also, since the original note was with Lynette and the latter would not surrender to Paula the original note which Lynette kept in a place about one day’s trip from where she received the notice to produce the note and in spite of such notice to produce the same within 6 hours from receipt of such notice, Lynette failed to do so. Paula presented a copy of the note which was executed at the same time as the original and with identical contents. Over the objection of Lynette, will Paula be allowed to testify as to the true agreement or contents of the promissory note? Why? (2001 BAR)

A: YES. As an exception to the parol evidence rule, a party may present evidence to modify, explain or add to the terms of the written agreement if he puts in issue in his pleading the failure of the written agreement to express the true intent and agreement of the parties thereto. Here, Paula has alleged in her complaint that the promissory note does not express the true intent and agreement of the parties. The parol evidence rule may be admitted to show the true consideration of the contract. (Sec. 10, Rule 130, ROC, as amended)

Distinctions between the Original Document Rule and the Parol Evidence Rule

As to Definition

·        Original Document Rule: The original document is not available or there is a dispute as to whether said writing is original.

·        Parol Evidence Rule: Presupposes that the original document is available in court.

As to Prohibition

·        Original Document Rule: Prohibits the introduction      of secondary evidence in lieu of the original document regardless of whether it varies the contents of the original.

·        Parol Evidence Rule: Prohibits the varying of the terms of a written agreement.

As to Application

·        Original Document Rule: Applies to all kinds of writings.

·        Parol Evidence Rule: Applies only to written agreements (contracts)

On How To Invoke

·        Original Document Rule: Can be invoked by any party to an action whether he has participated in the writing involved.

·        Parol Evidence Rule: Can be invoked only when the controversy is between the parties to the written agreement, their privies, or any party affected thereby like a cestui que trust.

Waiver of the Parol Evidence Rule

Failure to invoke the benefits of the rule constitutes as waiver. Inadmissible evidence may be rendered admissible by failure to object. (Riano, 2019)

Probative Value

Even if the parol evidence is admitted, it does not mean that the court would give probative value to the parol evidence. Admissibility is not the equivalent of probative value or credibility. (Riano, 2019)

Considering the agreement’s mistake, imperfection or supposed failure to express the parties’ true intent was successfully put in issue in the complaint, this case falls under the exceptions provided by Sec 9, Rule 130. Accordingly, the testimonial and documentary parol evidence sought to be introduced, which attest to these supposed flaws and what they aver to have been the parties’ true intent, may be admitted and considered. However, this admission and availability for consideration is no guarantee of how exactly the parol evidence adduced shall be appreciated by the court. They do not guarantee the probative value, if any, that shall be attached to them. (Paras v. Kimwa Construction and Development Corp., G.R. No. 171601, 08 Apr. 2015)

INTERPRETATION OF DOCUMENTS

The language of a writing is to be interpreted according to the legal meaning it bears in the place of its execution, unless the parties intended otherwise. (Sec. 11, Rule 130, ROC, as amended)

When there are Several Provisions or Particulars

In the construction of an instrument, where there are several provisions or particulars, such a construction is, if possible, to be adopted as will give effect to all. (Sec. 12, Rule 130, ROC, as amended)

Conflict between General and Particular Provision

When a general and a particular provision are inconsistent, the following rules shall be followed:

1.      The particular provision is paramount to the general; and

2.      A particular intent will control a general one that is inconsistent with it. (Sec. 13, Rule 130, ROC, as amended)

Interpretation according to Circumstances

The proper construction of an instrument according to the circumstances shall be as follows:

a)     The circumstances under which it was made, including the situation of the subject thereof and of the parties to it, may be shown;

b)     Such circumstances must be shown so that the judge may be placed in the position of those whose language he or she is to interpret. (Sec. 14, Rule 130, ROC, as amended)

Presumption on Terms of Writing

The terms of a writing shall be interpreted as follows:

1.      It shall be presumed to have been used in their primary and general acceptation;

2.      Evidence is admissible to show that they have a local, technical, or otherwise peculiar signification; and

3.      Evidence is admissible to show that it was so used and understood in the particular instance, in which case the agreement must be construed accordingly. (Sec. 15, Rule 130, ROC, as amended)

Conflict between Written and Printed

When an instrument consists partly of written words and partly of a printed form, and the two are inconsistent, the written controls the printed form. (Sec. 16, Rule 130, ROC, as amended)

When the Character of Writing is Difficult to Decipher

When the characters in which an instrument is written are difficult to be deciphered, or the language is not understood by the court, it can be proved by evidence of:

1.      Persons skilled in deciphering the characters; or

2.      Those who understand the language. Such evidence is admissible to declare the characters or the meaning of the language. (Sec. 17, Rule 130, ROC, as amended)

Q: What is the rule in case the terms of an agreement admit of two (2) interpretations?

 A: When the terms of an agreement have been intended in a different sense by the different parties to it, it shall be construed as follows, to wit:

1.      That sense is to prevail against either party in which he or she supposed the other understood it; and

2.      When different constructions of a provision are otherwise equally proper, that is to be taken which is the most favorable to the party in whose favor the provision was made. (Sec. 18, Rule 130, ROC, as amended)