Where a contract has been reduced to writing the writing is regarded as the exclusive embodiment of the transaction and no extrinsic (parol) evidence which would have the effect of contradicting, altering, adding to or varying the written contract may be relied on. This is referred to as the parol evidence rule. The inadmissibility of parol evidence in interpretation of written contracts was reaffirmed by the Supreme Court of Appeal in Osman Tyres and Spares CC & another v ADT Security (Pty) Ltd.
Parol evidence cannot be used to change a written contract. But once the terms of the contract are known, evidence relating to the purpose of the agreement and its context can be used to interpret the terms.
When interpreting a written clause the court will first look at the language of the clause itself. If the language is clear and unambiguous, no evidence may be led to contradict, vary or alter such a plain meaning. If the written text is not clear, the court will accept extrinsic evidence in order determine the purpose of the clause, the commercial context of the whole agreement, and the background to the preparation of the document. The language of the written provision in question will then be read against these factors in order to ascertain a correct meaning. Therefore parol evidence is different to facts relevant to interpretation.
In Osman Tyres and Spares CC & another v ADT Security (Pty) Ltd the claimant sued for damages for breach of contract. In order to overcome a written exclusion clause, the claimant tried to rely on evidence of pre-contractual negotiations that contradicted the clause.
The court rejected this evidence. The claimant’s evidence contradicted the clear exclusion clause and a written non-variation clause, which provided that the written agreement constitutes the entire agreement between the parties, and that any unwritten representation or undertaking is not binding on the parties.