Friday, June 27, 2014

Oral Agreements vs. Written Contracts

Many contracts include a clause like this one:

Entire Agreement: This Contract constitutes the entire agreement between the parties and supersedes any and all prior arrangements, agreements, or discussions with respect to this subject matter. Parties have made no representations other than those contained in this Contract. 

A written contract is presumed to be the final agreement between the parties, and that presumption is even stronger when the agreement contains a clause of this type. What this means is that under the “parol evidence” rule, a party is generally prevented from introducing evidence in court that contradicts the written agreement.

For example, a Central State University professor hired on a written 10 month employment contract could not introduce evidence of a prior oral agreement of a three year contract.  Likewise, imagine a car salesperson who promises “no money down” but provides a final written contract requiring a $1000 down payment. In both cases, the written agreement is controlling.

The moral? Since you will be bound by the written agreement, both you, and an attorney, should read the document carefully before you sign it to make sure that it reflects all previous written or oral discussions.

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