It used to be that architects were “master builders.” That was back when buildings were built of stone masonry by stone masons and the architect told the stone mason where to set the stones. Those days are long gone. Today, buildings are complex undertakings of owners, architects, engineers, construction managers, subconsultants, specialty subcontractors and fabricators who are underpinned by sophisticated manufactured products and information technology. Ambitious individuals quickly find themselves out of their depth if they try to “master” this complexity. Today’s complex buildings are designed and built by teams. They are collective undertakings.
In the past, courts reflected the simpler times of the master builder. Words would be understood by their plain meaning, and it was generally forbidden to look outside of, “the four corners of the agreement,” as they used to say, to understand the meaning of the words in a construction contract. Modern courts acknowledge that in our complex undertaking, words have special meanings. Lawyers will introduce evidence from outside of the contract to enable the court to interpret the special meaning of the words within the contract. This evidence from outside of the contract is known as parol evidence. In law, parol means oral, unwritten, or not under seal.
Today, parol evidence is introduced into construction contract adjudications to help courts to interpret the special meaning of words. Parol evidence enables the understanding of the substance of an agreement. Courts cannot change that substance. In plain language: parol evidence is used to understand what the parties intended to build and its price, but not to change what they intended to build or its price.
Parol evidence is sometimes confused with the parol evidence rule. They are different terms of art. They have different meanings. The parol evidence rule bars a specific type of parol evidence: parol evidence consisting of verbal or written agreements that were formed prior to or at the same time as the written construction contract. Novice builders might trip over the parol evidence rule when a court asserts that their bid documents were not part of their construction contract. It’s true: unless your bid documents (including those exceptions that you claimed when you bid) are expressly stated in your contract documents, they are not part of your contract.
There are two important take-aways here. First, the special meaning of the words in your contract must be understood. But no one individual can reach a sufficient level of understanding. Your team must reach a collective understanding. Second, if you want it in your contract, it must be written in your contract documents.
A very important distinction it is! At times, our company had trouble with sales reps “tripping” over the PER, thinking their proposals automatically became part of the contract. I believe this came from the notion that since the proposals came first and thus served as the basis of negotiation, that somehow the proposals carried contractual legal effect even when not referenced in the final agreement. This typically was a scope of work issue.