Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Monday, October 14, 2013

Legal instruments (notes, contracts) and the parol evidence rule

The nature of the parol evidence rule
The parol evidence rule functions to make the instrument sued on the sole repository of the legal transaction. Lawrence Gen. Corp. v. Anchor Post Prod. of Tex., Inc., No. 05-95-01771-CV, 1997 WL 78913 at *2 (Tex. App.-Dallas Feb. 26, 1997, no writ) (not designated for publication). In other words, the terms of the transaction must be derived from the writing alone. 

Where the instrument sued on is a professedly partial or incomplete agreement, however, the rule excluding parol evidence does not apply. Id.; see also Garner v. Redeaux, 678 S.W.2d 124, 128 (Tex. App.-Houston [14th Dist.] 1984, writ ref'd n.r.e.). An instrument is incomplete when it refers to terms or understandings not embraced in its provisions. Lawrence Gen. Corp., 1997 WL 78913 at *2.

SOURCE:  DALLAS COURT OF APPEALS -  No. 05-11-01536-CV - 6/7/2013 

Also see Anglo-Dutch Petroleum Int'l,352 S.W.3d at 451; Baroid Equip., Inc. v. Odeco Drilling, Inc., 184 S.W.3d 1, 13 (Tex. App.-Houston [1st Dist.] 2005, pet. denied) ("The parol evidence rule is not a mere rule of evidence, but a rule of substantive contract law. . . . Evidence violating the parol evidence rule has no legal effect and merely constitutes proof of facts that are immaterial and inoperative."). But the parol evidence rule
does not prohibit consideration of surrounding circumstances that inform, rather than vary from or contradict, the contract text. Those circumstances include . . . the commercial or other setting in which the contract was negotiated and other objectively determinable factors that give a context to the transaction between the parties.
Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 469 (Tex. 2011) (internal citations omitted).