Contracts and Sales Multistate Bar Practice Exam

Which of the following issues does the Parol Evidence Rule not apply to?

1. Establishing the validity of a contract

2. Clarifying ambiguous contract terms

3. Ongoing negotiations prior to agreement

4. Discussing terms not included in the written contract

The correct answer is: Establishing the validity of a contract

The Parol Evidence Rule generally applies to written contracts to prohibit the introduction of evidence from prior oral or written agreements that contradict, modify, or add to the terms of the written contract. However, it does not apply in contexts that can affect the validity of the contract itself. Establishing the validity of a contract is a separate legal inquiry from interpreting the terms within that contract. This can involve issues such as whether the parties had the capacity to contract, whether there was mutual assent, or if the contract was formed under duress or fraud. Such foundational issues about the existence and enforceability of the contract can be established through various forms of evidence, including oral statements or prior agreements, and do not violate the Parol Evidence Rule. In contrast, clarifying ambiguous terms, ongoing negotiations prior to an agreement, and discussing terms not included in the written contract all involve situations where the Parol Evidence Rule would typically apply. These contexts revolve around interpreting or supplementing an already existing agreed-upon written contract, which the rule seeks to limit. Thus, the significant point here is that questions of validity are treated distinctly and can appropriately incorporate external evidence without infringing on the Parol Evidence Rule.