Guide to Evidence  Section 1121. Parol evidence

Parol evidence refers to statements, agreements, or understandings, whether oral or written, that are external to a written contract and were made prior to or at the same time as the execution of the contract. When parties have deliberately reduced their agreement to a final and complete written document, known as a fully integrated contract, parol evidence is generally not admissible to alter, add to, or contradict the terms of the contract.

(1)

Parol evidence may be admissible if the judge determines as a matter of law that language in a contract is ambiguous. A contract term is ambiguous if it is reasonably susceptible to more than one meaning. Where a contract term is ambiguous, parol evidence may be admitted solely to clarify the parties’ intent as to the ambiguous term, not to rewrite or expand the agreement.

(2)

Parol evidence may also be admissible under recognized exceptions, such as situations involving fraud, mutual mistake, duress, or the existence of collateral agreements that do not contradict or vary the written contract.

Once there is a preliminary determination by the judge that language in a contract is ambiguous, extrinsic evidence such as prior negotiations, industry custom, trade usage, or the parties’ course of performance may be admitted to illuminate what the contracting parties intended.

(1)

“Industry custom” refers to established practices, usages, or accepted meanings that govern a particular profession or sector.

(2)

“Trade usage” refers to the practices or meanings that have developed within a particular trade or market to give specialized meaning to certain contract terms.

(3)

Where parties have diverse interests in the interpretation of ambiguous terms from the outset, but have adopted and acted upon a particular construction, the postcontract course of performance is admissible to interpret such terms.

Subsection (a)

Parol evidence refers to prior or contemporaneous written or oral negotiations, agreements, or understandings regarding the meaning of a contract or instrument. See Kobayashi v. Orion Ventures, Inc., 42 Mass. App. Ct. 492, 496 (1997). It can also include subsequent conduct as evidence of the parties’ interpretation of ambiguous language. Krumsiek v. Collins Elec. Co., 105 Mass. App. Ct. 214, 218 (2025). The parol evidence rule is “a rule of substantive law” and not merely an evidentiary issue. Sound Techniques, Inc. v. Hoffman, 50 Mass. App. Ct. 425, 429 (2000). See Kerwin v. Donaghy, 317 Mass. 559, 568 & n.4 (1945).

A contract is fully integrated where the parties intended the writing to be the exhaustive embodiment of their agreement. Kerwin, 317 Mass. at 567 (terms of trust instruments established rights of parties “beyond all question” and precluded resort to extrinsic evidence); Realty Fin. Holdings, LLC. v. KS Shiraz Manager, LLC, 86 Mass. App. Ct. 242, 250–251 (2014) (limited liability company agreements were fully integrated contracts; parol evidence of prior negotiations inadmissible to show that agreements were subject to contingencies). The rationale for the rule is to preserve the certainty, integrity, and predictability of written agreements. Written agreements that are facially complete and unambiguous cannot be undermined by past negotiations or side agreements. Id. at 248–249 (where agreements were fully integrated contracts, parol evidence rule prohibited evidence of prior negotiations).

The preliminary determination whether an agreement is fully integrated is a question of fact for the judge. Ryder v. Williams, 29 Mass. App. Ct. 146, 149 (1990). Parol evidence is admissible to determine whether the contract is intended to be the parties’ statement of their complete agreement. Id.

Subsection (b)(1)

The threshold determination of ambiguity is a question of law for the court. The judge must first determine, as a matter of law, whether the contract language is reasonably susceptible to more than one interpretation. Browning-Ferris Indus., Inc. v. Casella Waste Mgt. of Mass., Inc., 79 Mass. App. Ct. 300, 307 (2011). Parol evidence is admissible only “when a contract is ambiguous on its face or as applied to the subject matter.” General Convention of the New Jerusalem in the U.S. of Am., Inc. v. MacKenzie, 449 Mass. 832, 836 (2007). Mere disagreement between the parties is not enough to create ambiguity; genuine uncertainty in the language itself is required. Browning-Ferris Indus., Inc., 79 Mass. App. Ct. at 307.

The court is to read the contract as a whole and consider the plain meaning of its terms. Any ambiguity must arise from the text itself or from its application to the facts as viewed objectively. Zurich Am. Ins. Co. v. Medical Props. Trust, Inc., 494 Mass. 382, 386 (2024) (court looks to contested language, text of whole contract, and case law to determine whether term is ambiguous); Balles v. Babcock Power, Inc., 476 Mass. 565, 571 (2017) (contractual language is ambiguous when it can support a reasonable difference of opinion as to meaning of words of contract). A court may consider a patent ambiguity in the terms of the contract where the text is unclear, is internally inconsistent, employs undefined terms, or uses language so vague that its meaning cannot be resolved from the document alone. A court may also consider a latent ambiguity when the language appears clear when read in isolation but uncertainty emerges when applying the terms to external facts or circumstances. Winchester Gables Inc. v. Host Marriott Corp., 70 Mass. App. Ct. 585, 591–593 (2007) (where meaning of terms of contract is obscure, uncertain, or doubtful, evidence of circumstances under which it was entered is admissible to explain meaning of language but not to contradict, vary, or enlarge its terms).

Parol evidence may be admitted as contextual background to clarify ambiguous language, not to vary, contradict, or replace the written contract. Winchester Gables Inc., 70 Mass. App. Ct. at 591; Kobayashi v. Orion Ventures, Inc., 42 Mass. App. Ct. 492, 496 (1997). See Bettencourt v. Bettencourt, 362 Mass. 1, 8–9 (1972) (while parol evidence is commonly used to resolve ambiguities in wills, disposition of property in reciprocal wills was in nature of a contract and extrinsic evidence cannot be used to vary integrated contract). Where the court finds an ambiguity in the written terms of the contract, the court may allow evidence of the facts and circumstances of the transaction for purposes of evaluating, but not changing or contradicting, its terms. Robert Indus. Inc. v. Spence, 362 Mass. 751, 753–754 (1973). See, e.g., Cavanagh v. Cavanagh, 490 Mass. 398, 411–417 (2022) (court determined, as matter of law, provision in separation agreement, later incorporated into divorce judgment, concerning contribution for minor child’s schooling, was ambiguous and allowed extrinsic evidence of parties’ communications during the marriage regarding child’s education plan to inform parties’ understanding of provision).

Subsection (b)(2)

Exceptions exist to the principle of the integrity of the written contract where there are equitable considerations such as instances of fraud, mutual mistake, or accident. Kerwin v. Donaghy, 317 Mass. 559, 567–568 (1945); Glass v. Hulbert, 102 Mass. 24, 30 (1869). See McEvoy Travel Bur., Inc. v. Norton Co., 408 Mass. 704, 709–714 (1990) (statement by party that it did not intend to enforce contractual termination provision included at insistence of its lawyers admissible to form basis of fraud claim); Shawmut-Canton LLC v. Great Spring Waters of Am., Inc., 62 Mass. App. Ct. 330, 334–335 (2004) (parol evidence admissible to show inducement by misrepresentation in lease negotiations).

Subsection (c)(1)–(2)

Industry custom and trade usage may supply interpretive meaning to ambiguous language, particularly when both parties operate in the same industry. Affiliated FM Ins. Co. v. Constitution Reinsurance Corp., 416 Mass. 839, 842–846 (1994) (where contract language is ambiguous, evidence of custom and trade practice admissible to arrive at interpretation that supports justice, common sense, and probable intention of parties). If a term has a well-established, commonly understood meaning within a particular trade, that meaning may be admissible to aid the court’s interpretation of the language, particularly where critical or specialized terms are used. Acushnet Co. v. Beam, Inc., 92 Mass. App. Ct. 687, 700 (2018). The industry custom must be so widespread and established that the parties can be presumed to have incorporated it into their agreement, even if not explicitly referenced. See id.

Subsection (c)(3)

Just as extrinsic evidence of the circumstances surrounding the contract formation may be admissible to interpret language found to be uncertain or equivocal in meaning, but not to contradict or change the language, an equivalent principle applies with respect to the parties’ postformation course of performance. Pittsfield & N. Adams R.R. v. Boston & Albany R.R., 260 Mass. 390, 398 (1927); Krumsiek v. Collins Elec. Co., 105 Mass. App. Ct. 214, 218–219 (2025).