Contracting parties should not leave provisions to chance
Although at first glance it appears as though the Parol Evidence Rule is trite, parties often ignore it in proceedings, and rely instead on evidence which would – according to the rule – be inadmissible.
So says Baker McKenzie SA’s John Bell and Rui Lopes, who note that the SCA was recently tasked with considering this long-established rule in the case of Mike Ness Agencies CC t/a Promech Boreholes v Lourensford Fruit Company (Pty) Ltd.
In this case, the appellant gave the respondent a written quotation to drill a borehole on one of his farms. In the quotation, the appellant undertook to guarantee water within 70m of digging and that if no water was found at this depth, the appellant would drill from 70m to 100m, free of charge.
As the respondent was not prepared to pay the appellant until it was shown that water had been found, a deposit clause was inserted into the contract of only paying it on water being struck. The quote was accepted, and drilling began.
At 58m, a considerable amount of water was reached. However, the appellant continued to drill down to 70m, as was agreed, and stopped at a depth of 76m.
Yet, despite the borehole yielding a healthy amount of water, the respondent refused to pay.
In their analysis, Bell and Lopes note that in the SCA, the respondent’s case centred on the fact that the appellant had requested a borehole with a yield of 10 000 litres per hour and that – as the hole did not deliver such a yield – it was not obliged to pay.
The court held that this was not what the agreement provided.
The Parol Evidence Rule provides that where the parties to a contract have reduced their agreement to writing, it becomes the exclusive memorial of the transaction – and no evidence may be led to prove its terms other than the document itself, nor may the contents of the document be contradicted, altered, added to or varied by oral evidence.
The SCA then stated that while a considerable amount of evidence was led by both sides regarding their negotiations and what their intention was, this was inadmissible. The court noted that often the Parol Evidence Rule tends to be ignored and seldom enforced by trial courts.
It held that the terms of the quote were clear and unambiguous and that it did not make provision for payment only in the event of a minimum of 10 000 litres per hour being obtained.
The respondent attempted to overcome the Parol Evidence Rule by arguing that the agreement was partly in writing and partly oral.
In Affirmative Portfolios CC v Transnet Ltd t/a Metrorail, the SCA held that where an agreement is partly written and partly oral, then the Parol Evidence Rule prevents the admission only of extrinsic evidence to contradict or vary the written portion, without precluding proof of the additional or supplemental oral agreement, which is often referred to as the Partial Integration Rule.
In light of this, the authors warn: ‘Parties should be mindful to record their agreement in its entirety and to not leave any provisions to chance, as any attempt by the parties to lead evidence contradicting the terms of the agreement, would most likely not succeed on the basis of the Parol Evidence Rule.’
© Juta and Company (Pty) Ltd 2016
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