Contract Interpretation and the Parol Evidence Rule
When parties disagree about what a written contract means, courts apply rules of interpretation and the parol evidence rule. This guide explains how courts read contracts and when earlier or outside agreements can be considered.
Reading the words
Courts start with the plain meaning of the words, read in the context of the whole agreement. In addition, they consider the parties’ course of dealing, trade usage and course of performance. Ambiguous terms are often read against the party who drafted them.
The parol evidence rule
(1) A binding integrated agreement discharges prior agreements to the extent that it is inconsistent with them. (2) A binding completely integrated agreement discharges prior agreements to the extent that they are within its scope.
In other words, a final written agreement controls over earlier negotiations. A “merger” or “integration” clause stating that the writing is the entire agreement makes this more likely.
The UCC version
Terms … set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented (a) by course of dealing or usage of trade … or by course of performance …
Even so, outside evidence is always admissible to show fraud, duress or mistake, or to interpret an ambiguous term.
Researching parol evidence rule in your state
To research parol evidence rule for a real matter, start with the primary sources. For example, read the statute, the rule and the documents in your own file. Then look for recent appellate decisions from your state, because they control how local courts read the law. After that, compare what you found with the federal rules that may also apply. Our state procedures guide and the Research Center can help you find and check each source.
Sources and further reading
Official sources used on this page:
Related reading on Lawtopolis:
Sources
- Restatement (Second) of Contracts § 213
- UCC § 2-202
Official sources:
opencasebook.org/casebooks/11720-bruckner-how…
law.cornell.edu/ucc/2/2-202
Sources last reviewed: 2026-10-23
Lawtopolis provides legal information and education, not legal advice. Using this site does not create an attorney-client relationship. Laws and court rules vary by jurisdiction and change over time; verify every authority against the official source and consult a licensed attorney in your jurisdiction about your situation.