law-parol-evidence-rule | ambiguous and unambiguous contractual provisions | contract formation | interpretation of
contracts |
Courts will enforce an unambiguous contract as written and will not receive parol evidence
for the purpose of creating an ambiguity to give the contract meaning different from that
which its language imports. Sacks v. Haden, 266 S.W.3d 447, 450 (Tex. 2008) (per curiam).
The parol evidence rule is a rule of substantive law. Lewis v. Adams, 979 S.W.2d 831, 836
(Tex. App.-Houston [14th Dist.] 1998, no pet.) (citations omitted).
When the parties have concluded a valid integrated agreement, this rule precludes
enforcement of inconsistent prior or contemporaneous agreements. Id. Parol evidence is,
however, admissible to show (1) the execution of a written agreement was procured by
fraud, (2) an agreement was to become effective only upon certain contingencies, or (3) the
parties' true intentions if the writing is ambiguous. Litton v. Hanley, 823 S.W.2d 428, 430
(Tex. App.- Houston [1st Dist.] 1992, no writ) (citations omitted).
Whether the Consulting Agreement was Ambiguous, thus Warranting Admission of Parol Evidence
In issue one, Askari argues the consulting agreement was ambiguous as a matter of law. In issue two, Askari argues
the trial court's disallowance of parol evidence was therefore reversible error.
Courts will enforce an unambiguous contract as written and will not receive parol evidence for the purpose of
creating an ambiguity to give the contract meaning different from that which its language imports. Sacks v. Haden,
266 S.W.3d 447, 450 (Tex. 2008) (per curiam). A court may consider the parties' interpretation and “'admit
extraneous evidence to determine the true meaning of the instrument'" only when a contract is ambiguous. Id.
(quoting Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (per curiam)). “'Whether a
contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the
circumstances present when the contract was entered.'" Id. at 451 (quoting Columbia Gas Transmission Corp. v.
New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996)).
A contract is not ambiguous if a court can give the contract a definite or certain meaning as a matter of law.
Columbia Gas, 940 S.W.2d at 589. Nevertheless, if after application of the pertinent rules of construction, the
contract is subject to two or more reasonable interpretations, the contract is ambiguous, and a fact issue exists
regarding the parties' intent. Id. An ambiguity does not arise, however, simply because the contract lacks clarity or
the parties advance conflicting interpretations of the contract. Universal Health Servs., Inc. v. Renaissance Women's
Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003). For an ambiguity to exist, both interpretations must be reasonable.
Columbia Gas, 940 S.W.2d at 589. It is for the court to decide whether there is more than one reasonable
interpretation of a contract, thereby creating a fact issue concerning the parties' intent. Id.
Finally, an ambiguity in a contract may be patent or latent. Nat'l Union, 907 S.W.2d at 520. A patent ambiguity is
evident on the face of the contract. Id. In contrast, a latent ambiguity arises when a contract that is unambiguous
on its face is applied to the subject matter with which it deals and an ambiguity appears by reason of some collateral
matter. Id. If a latent ambiguity arises from this application, parol evidence is admissible for the purpose of
ascertaining the true intention of the parties as expressed in the agreement. Id.
Askari argues a latent ambiguity exists when one compares the conditions in Section 1 of the agreement with the
contents of the attached Exhibit B. He contends “this case is about money and stock already owed," and argues the
agreement merely memorializes his compensation for work already done as reflected by the August 1, 2001 date the
agreement was “made" (set forth in the introductory paragraph of the agreement) and the “Value of Certain
Services Performed" from August 2001 through June 2002 (set forth in Exhibit B). Additionally, Askari argues it is
unreasonable to interpret the agreement as requiring him retroactively to satisfy the conditions precedent, i.e.,
receipt of approval and provision of invoices, for work already performed.
The agreement, however, refers to consultants' providing “a written invoice detailing the services duly performed
and to be performed" (emphasis added). Thus, the agreement requires invoices not only for future, but also past,
services - services for which Exhibit B simply provides a value. There is nothing unreasonable in reading the
agreement and Exhibit B together as requiring Askari to provide, if he had not already done so, invoices for work
done from August 2001 through June 2002. There is also nothing unreasonable about reading the agreement and
Exhibit B together to require retroactive approval for work already performed before the company would
compensate Askari in the amounts listed in Exhibit B. Accordingly, we conclude the agreement is not ambiguous.
Askari's first issue is overruled.
Askari v. Endevco, Inc. (Tex.App.- Houston [14th Dist.] Jul. 2, 2009)(breach of contract for consulting services claim,
payment in stock, court sustained both parties' objections to parol evidence, applicability of parol evidence rule,
ambiguous and unambiguous contract provisions, preservation of error regarding evidentiary objections).
AFFIRMED: Opinion by Justice Seymore
Before Justice Seymore
14-08-00278-CV Farzad Askari v. Endevco, Inc.
Appeal from 11th District Court of Harris County
Trial Court Judge: Mark Davidson
PAROLE EVIDENCE RULE NOT APPLICABLE. When parties have made an unambiguous written agreement with
respect to a particular subject matter, the parol evidence rule prohibits the presentation of extrinsic evidence to vary
or contradict the terms of a written instrument. Silsbee Hosp., Inc. v. George, 163 S.W.3d 284, 293 (Tex. App.-
Beaumont 2005, pet. denied) (citing Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 283 (Tex. 1996)).
EnDevCo's evidence and argument of which Askari complains, however, were not directed at the meaning of the
agreement. Instead, they were directed at impeaching Adair's character and showing his bias as a witness. Askari
concedes as much, alleging, “These improper arguments unfairly discredited John Adair as a witness." Thus,
Askari's third issue also fails on the merits.
Having concluded the agreement is not ambiguous, we therefore conclude the trial court did not err in excluding
parol evidence.[4] Askari's second issue is overruled.
However, because we have determined the Cross-License Agreement is not ambiguous, parol evidence is not
admissible "to vary the terms or to show the construction placed thereon by the parties at the time or subsequent to
the making thereof.” Murphy v. Dilworth, 137 Tex. 32, 35, 151 S.W.2d 1004, 1005 (1941); see also In re H. E. Butt
Grocery Co., 17 S.W.3d 360, 369 (Tex.App.- Houston [14th Dist.] 2000, orig. proceeding) ("The parol evidence rule
precludes consideration of extrinsic evidence to contradict, vary or add to the terms of an unambiguous written
agreement absent fraud, accident or mistake.”).
While it is true parol evidence may be admitted to explain technical or other terms as used in a particular business
or industry, there are no such terms found in the Cross-License Agreement. Accordingly, we need not consider
industry custom in our analysis. Royal Indemnity Co. v. Marshall, 388 S.W.2d 176, 180 (Tex. 1965). Cameron
International Corp. v. Vetco Cray, Inc. (Tex.App.- Houston [14th Dist.] Mar. 31, 2009)(Anderson)(contract
interpretation, confirmation of an arbitrator’s award, unambiguous contract)
DeClaire v. G&B McIntosh Family LP (Tex.App. - Houston [1st Dist.] Nov. 8, 2007)(Keyes)
(BoC, note, parol evidence rule) DeClaire v. G & B MCINTOSH FAMILY LTD., 260 SW 3d 34 01-06-00423-CV.-
Tex: Court of Appeals, Houston May 8, 2008
REVERSE TC JUDGMENT AND REMAND CASE TO TC FOR FURTHER PROCEEDINGS: Opinion by Justice Keyes
Before Chief Justice Radack, Justices Keyes and Higley
01-06-00423-CV Christopher G. DeClaire ("DeClaire") v. G&B McIntosh Family Limited Partnership
Appeal from 269th District Court of Harris County (Honorable John T. Wooldridge)
Parol Evidence Rule
We next determine whether the trial court could consider parol evidence. 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, 46 611 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).
Here, the trial court found that DeClaire and McIntosh entered into an oral agreement whereby DeClaire would
repay the Partnership $159,000.00 plus interest. The parties' written contract—the DeClaire Note—included the
same terms as the oral agreement, with the addition of the sole recourse language. Because the oral agreement is
inconsistent with the written contract, we conclude that the trial court was precluded from enforcing the prior oral
agreement. See Baroid Equip., 184 S.W.3d at 16; Simmons v. Compania Financiera Libano, S.A., 830 S.W.2d 789,
791 (Tex.App.-Houston [1st Dist.] 1992, writ denied) (holding that the "clear terms of a negotiable instrument, such
as the ones in this case, cannot be varied by a parol agreement which purports to change the obligor's
responsibilities"); Texas Export Development Corp. v. Schleder, 519 S.W.2d 134, 137 (Tex.Civ.App.-Dallas 1974, no
writ) (holding that parol evidence tendered by maker of note is inadmissible because it "negates the very obligation
imposed upon him in the written instrument"). Because the trial court could not rely on parol evidence, we also
conclude that legally insufficient evidence supports the trial court's ninth and tenth conclusions of law under the
declaratory judgment sub-heading.
We sustain DeClaire's fourth and twelfth issues. Because we sustain DeClaire's fourth issue and twelfth issues, it is
not necessary to address DeClaire's fifth and sixth issues, concerning the validity of an oral agreement. See TEX.R.
APP. P. 47.1.
Edascio, LLC v. NextiraOne, LLC (Tex.App.- Houston [1st Dist.] May 22, 2008)(Jennings)
(commercial law, breach of contract, JNOV, parol evidence rule bars introduction of evidence to prove claim)
AFFIRM TC JUDGMENT: Opinion by Justice Jennings
Before Chief Justice Radack, Justices Jennings and Bland
01-07-00362-CV Edascio, L.L.C. v. NextiraOne, L.L.C.
Appeal from 281st District Court of Harris County
Trial Court Judge: Hon. David J. Bernal
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