The parol evidence rule is not a rule of evidence, even though it governs admissibility of testimony

NATURE OF PAROL EVIDENCE RULES, EFFECT, AND POSSIBLE EXCEPTIONS 

The parol evidence rule is a rule of substantive law, not a rule of evidence. See Hubacek v. Ennis State Bank, 159 Tex. 166, 169, 317 S.W.2d 30, 31 (1958). When parties reduce an agreement to writing, the law of parol evidence presumes, in the absence of fraud, accident, or mistake, that any prior or contemporaneous oral or written agreements merged into the final written agreement. See DeClaire v. G&B McIntosh Family Ltd. P'ship, 260 S.W.3d 34, 45 (Tex. App.-Houston [1st Dist.] 2008, no pet.). Any provisions not set out in the writing are presumed to have been abandoned before execution of the agreement or, alternatively, they are presumed to have never been made. Id.

PAROL EVIDENCE TO BE DISREGARDED WHEN RULE APPLIES 

Evidence that violates the parol evidence rule has no legal effect and "merely constitutes proof of facts that are immaterial and inoperative." See Piper, Stiles & Ladd v. Fid. & Deposit Co. of Md., 435 S.W.2d 934, 940 (Tex. Civ. App.-Houston [1st Dist.] 1968, writ ref'd n.r.e.). Such evidence cannot be considered by the court when it construes the contract, even if the evidence is admitted without objection. See Johnson v. Driver, 198 S.W.3d 359, 364 (Tex. App.-Tyler 2006, no pet.).

WHAT EXCEPTIONS ARE THERE AND WHEN CAN THEY BE INVOKED? 

There are exceptions, however. Parol evidence may be admitted to show (1) that the contract was induced by fraud, accident, or mistake; (2) that an agreement was to become effective only upon certain contingencies; or (3) in the case of ambiguity, that the parties' true intentions differ from those expressed in the agreement. See Gonzalez v. United Bhd. of Carpenters & Joiners of Am., Local 551, 93 S.W.3d 208, 211 (Tex. App.-Houston [14th Dist.] 2002, no pet.).

Parol evidence may also be admitted under an additional exception to show collateral, contemporaneous agreements that are consistent with the underlying written agreement. See DeClaire, 260 S.W.3d at 45. However, this exception does not permit parol evidence that varies or contradicts the express or implied terms of the written agreement. Id.

SOURCE: HOUSTON COURT OF APPEALS - No. 14-13-00730-CV - 11/6/2014

ADDITIONAL CASELAW EXCERPT ON PAROL EVIDENCE RULE FROM CITED CASE: 

The parol evidence rule is a rule of substantive law. Hubacek v. Ennis State Bank, 159 Tex. 166, 317 S.W.2d 30, 31 (1958); Gonzalez v. United Bd. of Carpenters & Joiners, 93 S.W.3d 208, 211 (Tex. App.-Houston [14th Dist.] 2002, no pet.); Piper, Stiles & Ladd v. Fid. & Deposit Co., 435 S.W.2d 934, 940 (Tex.Civ.App.-Houston [1st Dist.] 1968, writ ref'd n.r.e.).

When parties reduce an agreement to writing, the law of parol evidence presumes, in the absence of fraud, accident, or mistake, that any prior or contemporaneous oral or written agreements merged into the written agreement and, therefore, that any provisions not set out in the writing were either abandoned before execution of the agreement or, alternatively, were never made and are thus excluded from consideration in interpreting the written agreement. See Hubacek, 317 S.W.2d at 31; Smith v. Smith, 794 S.W.2d 823, 827 (Tex.App.-Dallas 1990, no writ); Muhm v. Davis, 580 S.W.2d 98, 101 (Tex. Civ.App.-Houston [1st Dist.] 1979, writ ref'd n.r.e.). The terms of a promissory note cannot be contradicted or varied by parol evidence of a manner of payment other than as expressed in the note. Dameris v. Homestead Bank, 495 S.W.2d 52, 54 (Tex.Civ.App.-Houston [1st Dist.] 1973, no writ).

We review parol evidence questions de novo, as questions of law. City of Pasadena v. Gennedy, 125 S.W.3d 687, 691 (Tex.App.-Houston [1st Dist.] 2003, pet. denied). Evidence that violates the parol evidence rule has no legal effect and "merely constitutes proof of facts that are immaterial and inoperative." Piper, Stiles & Ladd, 435 S.W.2d at 940. Because all prior negotiations and agreements are presumed merged into the final agreement, parol evidence is not admissible to vary, alter, or supplement the terms of an otherwise unambiguous contract except to show (1) that the contract was induced by fraud, accident, or mistake; (2) that an agreement was to become effective only upon certain contingencies; or (3) in the case of ambiguity, that the parties' true intentions differ from those expressed in the agreement. See Messer v. Johnson, 422 S.W.2d 908, 912 (Tex.1968); Gonzalez, 93 S.W.3d at 211; Litton v. Hanley, 823 S.W.2d 428, 430 (Tex.App.-Houston [1st Dist.] 1992, no writ).

Parol evidence may also be admissible, under an additional exception, to show collateral, contemporaneous agreements that are consistent with the underlying agreement to be construed. See Hubacek, 317 S.W.2d at 31; see also Transit Enter., Inc. v. Addicks Tire & Auto Supply, Inc., 725 S.W.2d 459, 461 (Tex.App.-Houston [1st Dist.] 1987, no writ) (applying exception for collateral, consistent, contemporaneous agreements); Sherrod v. Bailey, 580 S.W.2d 24, 29 (Tex.Civ.App.-Houston [1st Dist.] 1979, writ ref'd n.r.e.) (same). But this latter exception does not permit parol evidence that varies or contradicts either the express terms or the implied terms of the written agreement. Hubacek, 317 S.W.2d at 31; Loe v. Murphy, 46*46 611 S.W.2d 449, 451-52 (Tex.Civ. App.-Dallas 1980, writ ref'd n.r.e.); NHA, Inc. v. Jones, 500 S.W.2d 940, 944-45 (Tex. Civ.App.-Fort Worth 1973, writ ref'd n.r.e.) (both citing Hubacek).

Under what circumstances is a contract construed as a matter of law, and extrinsic evidence precluded?

CONTRACT CONSTRUCTION AS A MATTER OF LAW 

If a written contract has a definite legal meaning, then a court should read the text and construe it as a matter of law without help from a jury. Frost Nat'l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005) (per curiam); Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). When the words on the page suffice, a court should not look outside the document to decide what the parties agreed. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). The overriding objective is to "ascertain and give effect to the parties' intentions as expressed in the document." Frost Bank, 165 S.W.3d at 311-12.

However, if a contract is ambiguous, the court should accept parol evidence and can empanel a jury to decide, as an issue of fact, the "true intent of the parties." Coker, 650 S.W.2d at 394-95. A contract is ambiguous if it is open to more than one reasonable reading. Frost Bank, 165 S.W.3d at 312. Deciding whether a contract is ambiguous is itself an issue of law for the court. Webster, 128 S.W.3d at 229.

To determine whether a contract is ambiguous, courts apply standard rules of interpretation. Frost Bank, 166 S.W.3d at 312. These rules require an attempt to harmonize the contract as a whole. Id. An ideal harmonization will not treat any clause as a nullity, and courts generally presume that every provision was intended to have some effect. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). Words should be given their ordinary meaning unless it appears from context that they were used in a technical or different sense. Id. Courts should interpret contracts from a utilitarian perspective, keeping in mind the parties' business objectives. Frost Bank, 165 S.W.3d at 312. Absurd, inequitable, or oppressive interpretations are to be eschewed unless they prove unavoidable. Id.

SOURCE: HOUSTON COURT OF APPEALS - No. 01-12-00677-CV - 2/13/2014

The lease unambiguously does not require First Industrial to give Michelin advance notice of the amount of the policy's deductible. See R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 519 (Tex. 1980) ("If a written instrument is so worded that a court may properly give it a certain or definite legal meaning or interpretation, it is not ambiguous."). As the contract is unambiguous, our determination of its meaning is a legal conclusion. See Frost Bank, 165 S.W.3d at 312. The trial court correctly disregarded the jury's findings and entered judgment in favor of First Industrial.

ADDITIONAL CASE

See Gilbert Tex. Contr., L.P. v. Underwriters at Lloyd's London, 327 S.W.3d 118, 133 (Tex. 2010) ("If a contract as written can be given a clear and definite legal meaning, then it is not ambiguous as a matter of law.").

Contract ambiguity as an affirmative defense in a contract dispute

CONTRACT AMBIGUITY AS DEFENSE 

When asserting ambiguity as an affirmative defense, the pleading must set out the alleged ambiguous portion of the contract and the meaning or construction relied on by the party asserting ambiguity. See World Help v. Leisure Lifestyles, Inc., 977 S.W.2d 662, 680 (Tex. App.-Fort Worth 1998, pet. denied). 

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

How do Texas courts resolve disagreements about what the contract means or requires?

CONTRACT-CONSTRUCTION PRINCIPLES EMPLOYED BY COURTS WHEN ANALYZING CONTRACT PROVISIONS

"The construction of an unambiguous contract is a question of law for the court," which we review de novo. Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex. 2011). "A contract is not ambiguous simply because the parties disagree over its meaning." Dynegy Midstream Servs., Ltd. P'ship v. Apache Corp., 294 S.W.3d 164, 168 (Tex. 2009). Rather, a contract is ambiguous only when "its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation." Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). "When discerning the contracting parties' intent, courts must examine the entire agreement and give effect to each provision so that none is rendered meaningless." Tawes, 340 S.W.3d at 425.

When performing this review, no single provision will be given controlling effect; instead, all of the provisions must be considered in light of the whole agreement. Id. "In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument." Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex. 2005). Accordingly, we "give contract terms their plain and ordinary meaning unless the instrument indicates the parties intended a different meaning." Apache Corp., 294 S.W.3d at 168.

STANDARD OF REVIEW ON APPEAL

The construction of a contract is a question of law that we review de novo in light of the entire agreement. See Chrysler Ins. Co. v. Greenspoint Dodge of Houston, Inc., 297 S.W.3d 248, 252-53 (Tex. 2009).

Contract construction is a question that we review de novo, and when performing that task, we review the entire contract. See Greenspoint Dodge of Houston, Inc., 297 S.W.3d at 252-53.

SOURCE: AUSTIN COURT OF APPEALS - 03-10-00784-CV - 01/4/2013

The interpretation or construction of an unambiguous contract is a matter of law to be determined by the court. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex. 2003). When interpreting a contract, our primary concern is to ascertain and give effect to the intent of the parties as expressed in the agreement. Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex.2006). To discern this intent, we examine and consider the entire writing in an effort to harmonize and give effect to all of its provisions so that none will be rendered meaningless. Id. No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument. Id. Interpretation of an insurance policy is governed by the same rules of construction applicable to other contracts. Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995).

SOURCE: HOUSTON COURT OF APPEALS - Nos. 14-10-00821-CV, 14-10-00856-CV, 14-10-01145-CV – 5/17/12 375 -  Garcia v. Bank of America Corporation, 375 S.W.3d 322 (2012)

To be legally binding, agreement can't be wishy-washy about what is agreed

Agreement to agree (in the future) does not make for a judicially enforceable contract.

ELEMENTS OF CONTRACT - PRECISION IN DEFINING TERMS AND OBLIGATIONS IS REQUIRED

The elements of a valid and enforceable contract are: (1) an offer; (2) an acceptance in strict compliance with the terms of the offer; (3) a meeting of the minds; (4) each party's consent to the terms; and (5) execution and delivery of the contract with the intent that it be mutual and binding. Hubbard v. Shankle, 138 S.W.3d 474, 481 (Tex. App.-Fort Worth 2004, pet. denied).

 

The necessary elements of both written and oral contracts are the same and must be present for a contract to be binding. Id. A contract's material terms must be sufficiently definite and reasonably certain to both parties. Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 846 (Tex. 2000).

 

Accordingly, all essential terms of the agreement must be agreed upon before a contract may be enforced by the courts. T.O. Stanley Boot Co., Inc. v. Bank of El Paso, 847 S.W.2d 218, 221 (Tex. 1992). If the terms of an alleged contract are so indefinite that it is impossible for the courts to determine the rights and obligations of the parties, it is not an enforceable agreement. Shin-Con Dev. Corp. v. I.P. Invs., Ltd., 270 S.W.3d 759, 765 (Tex. App.-Dallas 2008, pet. denied). Parties may agree on some terms sufficient to create a contract, leaving other provisions for later negotiation. See Scott v. Ingle Bros. Pac., Inc., 489 S.W.2d 554, 555 (Tex. 1972); Ski River Dev., Inc. v. McCalla, 167 S.W.3d 121, 133 (Tex. App.-Waco 2005, pet. denied). When an agreement leaves material terms open for future adjustment and agreement that never occur, it is not binding upon the parties and merely constitutes an agreement to agree. See Fort Worth Indep. Sch. Dist., 22 S.W.3d at 846; Ski River, 167 S.W.3d at 134.

SOURCE: DALLAS COURT OF APPEALS - No. 05-12-00653-CV – 2/21/2013

Litigating contracts: declaratory judgment vs. contract damages and enforcement

DECLARATORY JUDGMENT INDEPENDENT OF
DAMAGES CAUSED BY BREACH OF CONTRACTUAL OBLIGATION.

 

Different types of lawsuits may be brought relating to a contract. A suit seeking damages for breach is not the only variety.  

"A person interested under a . . . written contract. . . may have determined any question of construction or validity arising under the . . . contract . . . and obtain a declaration of rights, status, or other legal relations thereunder." TEX. CIV. PRAC. & REM. CODE ANN. § 37.004(a) (Vernon 2008). "A contract may be construed either before or after there has been a breach." Id. § 37.004(b).

Accordingly, a person can bring a declaratory judgment action following a breach of contract and have the rights under the contract declared. While such an action has much in common with a breach of contract action, they are distinct from each other. Specifically, a declaratory judgment action has the effect of determining liability without awarding damages, while a breach of contract action seeks both a determination of liability and an award of damages. See Intercontinental Group P'ship v. K.B. Home Lone Star, L.P., 295 S.W.3d 650, 660-61 (Tex. 2009).

"Further relief based on a declaratory judgment or decree may be granted whenever necessary or proper." TEX. CIV. PRAC. & REM. CODE ANN. § 37.011 (emphasis added). "Necessary or proper" is disjunctive, not conjunctive. Additionally, the further relief available is not limited only to actions necessary to enforce the judgment. Instead, further relief is available for anything that "serve[s] to effectuate the underlying judgment." State v. Anderson Courier Service, 222 S.W.3d 62, 65 (Tex. App.-Austin 2005, pet. denied).

When a case is remanded for further proceedings, res judicata does not apply at all because there is no second action. Jay Petroleum, L.L.C. v. EOG Resources, Inc., 332 S.W.3d 534, 540 (Tex. App.-Houston [1st Dist.] 2009, pet. denied). Further relief sought under section 37.011 is not limited to claims brought in the same cause. Valley Oil, 499 S.W.2d at 336. Instead, it "may be sought in the same proceeding or in a later proceeding." Lakeside Realty, 202 S.W.3d at 191.

SOURCE: HOUSTON COURT OF APPEALS – No. 01-11-00650-CV – 1/24/2013 – CBS Outdoor, Inc. v. Potter  

 

Whether a contract is clear or ambiguous makes a difference when it comes to litigation

   
The question whether there is ambiguity in contractual language impacts the admissibility of evidence outside the contract itself, which could otherwise not be considered under the parol [not parole] evidence rule. But often the parties disagree on whether ambiguity exists and the judge must make the call.
  

CONTRACT AMBIGUITY – OR ABSENCE THEREOF -- AND ITS IMPLICATIONS

  

Whether an agreement is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances existing at the time the contract was entered. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983); Ganske v. Spence, 129 S.W.3d 701, 707 (Tex. App.—Waco 2004, no pet.).

  

An ambiguity does not arise simply because the parties interpret the contract differently. Seagull Energy E & P, Inc. v. Eland Energy, 207 S.W.3d 342, 345 (Tex. 2006); Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000). A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation. Eland Energy, 207 S.W.3d at 345.

 
If the agreement can be given a certain or definite legal meaning or interpretation, it is not ambiguous, and we will construe it as a matter of law. Coker, 650 S.W.2d at 393. Moreover, a court will not change a contract merely because the court or one of the parties comes to dislike its provisions or thinks that something else is needed. Calpine Producer Servs., L.P. v. Wiser Oil Co., 169 S.W.3d 783, 787 (Tex. App.—Dallas 2005, no pet.).
 
We are not allowed to rely on parol evidence to ascertain the meaning of an unambiguous agreement. See Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (“Parol evidence is not admissible for the purpose of creating an ambiguity. Only where a contract is first determined to be ambiguous may the courts consider the parties’ interpretation . . . and admit extraneous evidence to determine the true meaning of the instrument.”).

SOURCE: WACO COURT OF APPEALS - 10-11-00257-CV – 12/7/11
RELATED LEGAL TERMS: contract construction, contract interpretation, ambiguous vs. unambiguous contractual provisions, parol evidence rule, 4-corners rule

Contract Construction & Ambiguity (per Houston's 14th Court of Appeals)

   
CONTRACT INTERPRETATION AND CONTRACT AMBIGUTIY
  
Contract interpretation depends on whether contract is ambiguous
  
In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006). We presume the parties to the contract intended every clause to have some effect. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996).

Contract terms are given their plain, ordinary, and generally accepted meanings unless the contract itself shows them to be used in a technical or different sense. Valence Operating Co., 164 S.W.3d at 662. We construe contracts from a utilitarian standpoint, bearing in mind the particular business activity sought to be served. Frost Nat’l Bank v. L & F Distribs., Ltd., 165 S.W.3d 310, 312 (Tex. 2005). We will avoid, when possible and proper, a construction which is unreasonable, inequitable, and oppressive. Id.

Whether a contract is ambiguous is a question of law. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex. 2003). A contract is ambiguous when its meaning is uncertain and doubtful or reasonably susceptible to more than one interpretation. Heritage Res., Inc., 939 S.W.2d at 121. A contract is not ambiguous simply because the parties advance conflicting interpretations. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996).

We determine whether a contract is ambiguous by looking to the contract as a whole in light of the circumstances present when the parties executed it. Sun Oil Co. (Del.) v. Madeley, 626 S.W.2d 726, 731 (Tex. 1981). If a contract is not ambiguous, courts must enforce it as written without considering parol evidence for the purpose of creating an ambiguity or giving the contract “a meaning different from that which its language imports.” David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008) (per curiam).

The contract is not ambiguous if it can be given a certain or definite meaning as a matter of law. Universal Health Servs., Inc. v. Renaissance Women’s Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003).

SOURCE: Houston Court of Appeals - 14-10-00558-CV - 8/16/11