Michigan Parol Evidence Rule
In UAW-GM Human Resource Center v. KSL Recreation Group, 228 Mich App 486, 491-493; 579 NW2d 411 (1998) the Court explained the parol evidence rule in detail.
The parol evidence rule may be summarized as follows: "parol evidence of contract negotiations, or of prior or contemporaneous agreements that contradict or vary the written contract, is not admissible to vary the terms of a contract which is clear and unambiguous." Schmude Oil Co v. Omar Operating Co, 184 Mich App 574, 580; 458 NW2d 659 (1990).
This rule recognizes that in "back of nearly every written instrument lies a parol agreement, merged therein." Lee State Bank v. McElheny, 227 Mich 322, 327; 198 NW 928 (1924).
"The practical justification for the rule lies in the stability that it gives to written contracts; for otherwise either party might avoid his obligation by testifying that a contemporaneous oral agreement released him from the duties that he had simultaneously assumed in writing." 4 Williston, Contracts, 631.
In other words, the parol evidence rule addresses the fact that "disappointed parties will have a great incentive to describe circumstances in ways that escape the explicit terms of their contracts." Fried, Contract as Promise (Cambridge: Harvard University Press, 1981) at 60.
However, parol evidence of prior or contemporaneous agreements or negotiations is admissible on the threshold question whether a written contract is an integrated instrument that is a complete expression of the parties' agreement. In re Skotzke Estate, 216 Mich App 247, 251-252; 548 NW2d 695 (1996); NAG Enterprises, Inc v. All State Industries, Inc, 407 Mich. 407, 410-411; 285 NW2d 770 (1979).
The NAG Court noted four exceptions to the parol evidence rule, stating that extrinsic evidence is admissible to show:
(1) that the writing was a sham, not intended to create legal relations:
(2) that the contract has no efficacy or effect because of fraud, illegality, or mistake;
(3) that the parties did not integrate their agreement or assent to it as the final embodiment of their understanding;
(4) that the agreement was only partially integrated because essential elements were not reduced to writing. NAG, supra at 410-411; 285 NW2d 770. See also 4 Williston, Contracts, 631.