The term parol evidence refers to matters discussed, either orally or in writing, during the drafting of a legal document (eg a contract) that are not included in the final written document. In the context of contract law, this refers to evidence or information that is irrelevant because it is not based on the final draft of the legally binding agreement in question.
Under the parole evidence rule, where the parties have expressed in the document that it represents their entire agreement and that anything said or written before that is not included in the agreement is irrelevant, such information can not be used as evidence unless special conditions apply (the most common being general contract defenses – fraud, duress and mistake). The purpose of the rule is to preserve the contract as the best source of evidence of the parties’ intent when entering into the contract in question. It forces the parties to include all important matters into the agreement.
Another situation where parol evidence is admitted during a trial is where it is decided that not all important details have been included in the final document, where the agreement is not clear or where additional information is needed to complete the picture for the court.
The rule in practice works like this. Say I agree to sell you my advice regarding the interpretation of a certain legal document for £500 per hour. We sign an agreement expressly stating this. Later, after I have provided you with a 5 page report with my conclusions and an invoice for £1,500, you refuse to pay. I sue you for the money. At trial you argue that we agreed that the total cost for the advice would be £500. I object, arguing that the parol evidence rule applies and there are no applicable exceptions to the rule. The court agrees. Your statements or any written evidence is excluded.
Note that it is a common misperception that the parole evidence rule is a rule of evidence. It is actually a substantive rule of law.