Pym v Campbell (1856) 6 E & B 370

The parol evidence rule and the construction of the terms of a written contract.

Facts

Pym and Campbell signed a written agreement wherein Campbell agreed to purchase three-eighths of the profits to accrue from Pym’s new invention. The invention did not receive the requisite approval from one of Campbell’s engineers and, accordingly, Campbell refused to pay Pym the purchase price. Pym sued for breach of contract. However, Campbell claimed that the agreement was conditional upon the approval of the invention, presenting oral evidence of party negotiations to that effect.

Issue

The question arose as to whether the oral evidence, extrinsic to the terms of the written contract, was admissible before the Court and able to alter the construction of said written contract and/or show that it was unenforceable.

Held

The Court held that, as a general rule of law, the terms contained within a signed written contract are conclusive and cannot be varied by parol evidence. Thus, parol evidence cannot introduce an addition to or variation from the terms of a written contract between the Parties. However, in this case, the Court held that the general parol evidence rule is not applicable as the question did not concern the construction of the terms of a contract but rather whether there was any agreement at all. Thus, parol evidence that sought to show that the agreement was never entered into was admissible. On the facts, the Court held that there was overwhelming evidence from the oral negotiations between the Parties that, prior to signing the written document, the Parties came to a mutual understanding the prospective purchase was not intended to be an agreement until the invention was approved by the engineers. As there was no approval, there was no agreement and Campbell was not obliged to pay Pym.

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