What is the test for admitting evidence that does not add to, subtract or vary the terms of a contract?

British Columbia, Canada


The following excerpt is from McGrane v. Epp, 2010 BCSC 1018 (CanLII):

Another way to consider whether evidence other than the deed of gift itself should be admissible to interpret or vary its terms is to consider the exceptions to the parol evidence rule: Gallen v. Butterley (1984), 1984 CanLII 752 (BC CA), 53 B.C.L.R. 38, 9 D.L.R. (4th) 496 (C.A.). In that case, Lambert J.A. described the parol evidence rule as follows, at 49-50: The parol evidence rule is not only a rule about the admissibility of evidence. It reaches into questions of substantive law. But it is a rule of evidence, as well as a body of principles of substantive law, and if the evidence of the oral representation in this case was improperly admitted, the appeal should be allowed. The rule of evidence may be stated in this way: Subject to certain exceptions, when the parties to an agreement have apparently set down all its terms in a document, extrinsic evidence is not admissible to add to, subtract from, vary or contradict those terms. So the rule does not extend to cases where the document may not embody all the terms of the agreement. And even in cases where the document seems to embody all the terms of the agreement, there is a myriad of exceptions to the rule. I will set out some of them. Evidence of an oral statement is relevant and may be admitted, even where its effect may be to add to, subtract from, vary or contradict the document: (a) to show that the contract was invalid because of fraud, misrepresentation, mistake, incapacity, lack of consideration, or lack of contracting intention; (b) to dispel ambiguities, to establish a term implied by custom, or to demonstrate the factual matrix of the agreement; (c) in support of a claim for rectification; (d) to establish a condition precedent to the agreement; (e) to establish a collateral agreement; (f) in support of an allegation that the document itself was not intended by the parties to constitute the whole agreement; (g) in support of a claim for an equitable remedy, such as specific performance or rescission, on any ground that supports such a claim in equity, including misrepresentation of any kind, innocent, negligent or fraudulent; (h) in support of a claim in tort that the oral statement was in breach of a duty of care. I do not consider that I am setting out an exhaustive list. I am only showing that appropriate allegations in the pleadings will require that the evidence be admitted. So if it is said that an oral representation, that was made before the contract document was signed, contains a warranty giving rise to a claim for damages, evidence can be given of the representation, even if the representation adds to, subtracts from, varies or contradicts the document, if the pleadings are appropriate, and if the party on whose behalf the evidence is tendered asserts that from the factual matrix it can be shown that the document does not contain the whole agreement. The oral representation may be part of a single agreement, other parts of which appear in the document (the one contract theory). Alternatively, the document may record a complete agreement, but there may be a separate collateral agreement, with different terms, one of which is the oral representation (the two contract theory). [Emphasis added.]

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