PAROL EVIDENCE AND INTERPRETATION

1. Contemporaneous writing: If an ancillary writing is signed at the same time a formal document is signed, the ancillary document will usually be treated as part of the writing, and will thus not be subject to the parol evidence rule. In other words, the writings will be treated as if they formed one document, and everything in them will be considered by the court in construing the contract. C&P, p. 122.

2. Subsequent agreements: It is essential to remember that the parol evidence rule never bars consideration of subsequent oral agreements. That is, a written contract may always be modified after its execution, by an oral agreement. “The most ironclad written contract can always be cut in two by the acetylene torch of parol modification supported by adequate proof.” Wagner v. Graziano Constr. Co., 136 A.2d 82 (Pa. 1957).

a. No-oral-modification clauses: Of course, the parties often put into their writing a “no oral modification” (N.O.M.) clause. As the name implies, an N.O.M. clause says that the writing cannot be modified except via an amendment signed by both parties.

i. Enforceability: Courts typically enforce N.O.M. clauses, holding that where such a clause exists, a true “modification” or amendment to the writing cannot be made except by another signed writing.

ii. Subject to waiver: However, the practical effect of N.O.M. clauses is frequently weakened by courts’ use of the doctrine of “waiver”—the contract is not modified by a later oral agreement, but A is frequently held to have waived the benefit of the N.O.M. clause by inducing B to rely on A’s oral statements that some provision of the contract won’t be insisted upon.

iii. Change orders in construction contracts: The tendency of the waiver doctrine to weaken the effect of an N.O.M. clause is frequently illustrated in construction contracts. Such contracts generally contain a type of N.O.M. clause inserted for the owner’s benefit, providing that no request for extra work will be effective unless it is made in a writing signed by the owner. Yet this kind of clause is often ineffective because of the waiver doctrine.

Example: A construction contract between Own and Contractor has a clause saying that no request by the owner or architect for extra work will be effective unless in a writing signed by Own. Own requests that Contractor add one foot in length to the porch Contractor is building. Contractor says, “OK, but that’ll cost you $1,000 extra; please sign the change order.” Own says, “I don’t want to be bothered with the paperwork, after all, we’re good friends and we don’t need the written contract to tell us what we’ve worked out, right? Just do the work, and I’ll make sure you’re paid.” Contractor does the work, and Own refuses to pay.

  If the court believes that this conversation happened, the court is likely to hold that Own’s oral statement constituted a waiver by him of the benefits of the N.O.M. clause, so that Own will have to pay the agreed-upon extra amount.

iv. Explicit modification required: But for a “no-oral-modification” clause to be rendered ineffective, it is usually required that something more occur than a mere oral agreement to overlook the clause. For a waiver of the no-oral-modifications clause to be effective, the party trying to escape from the clause must generally show that she relied, i.e., that she materially changed her position in reliance upon the waiver.