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Muhammad Imran Shah bin Misman 2016239762 Parol evidence rule says that any extrinsic evidences cannot be brought into the court unless the document itself. Essentially the rule aims to protect the original contents of the written contract which will contribute to maintaining certainty and stability...

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Muhammad Imran Shah bin Misman 2016239762 Parol evidence rule says that any extrinsic evidences cannot be brought into the court unless the document itself. Essentially the rule aims to protect the original contents of the written contract which will contribute to maintaining certainty and stability; particularly in business dealing. The parol evidence rule prohibits a person from adducing oral evidence where the terms of the contract have been put into writing.

The parol evidence rule is found under common law and in Malaysia is provided in Section 91 and 92 of the Evidence Act 1950. There are cases where parol evidence may be admissible in court. The rationale for this rule can be seen in the case of Tindok Besar Estate Sdn Bhd v Tinjar Co. In this case the appellant was a contractor for extraction of timber for a company. He later decided not to carry on with the work. An agreement was made between the appellant and the respondent where the respondent undertook the work of extracting timber. At the trial, the trial judge in construing the agreement admitted parol evidence to prove several implied undertakings on the ground that not all the terms had been incorporated into the agreement. The court held that the evidence ought to be adduced falls within the scope of any of the provisos, it should not be allowed.

Now back to the case in question, which is the case of Keng Huat Film Co Sdn Bhd v Makhanlall (Properties) Pte Ltd, the appellant is a company owned by one Mr. Ong Keng Huat. After Mr Ong ended his agreement with his previous partner, he entered into a new lease agreement with the respondent company for the same premises under the name of Keng Huat Film Co. (the appellant). This new lease incorporated a Clause 4(e), similar to Clause 4(e) in the 1957 lease, wherein the appellant company, given option to renew lease for another ten years, at the same rent and “containing the like covenants and provisos as were therein contained”. When the time for renewal approached, the appellant through its solicitors requested that the renewed lease contain the same terms as the first lease and annexed a draft copy of the second lease for approval by the respondent. The respondent replied and returned the draft lease duly approved but with Clause 4(e) containing the covenant for renewal deleted. The appellant company disagreed and insisted that by Clause 4(e) in the first lease entitled it to a perpetual covenant to renew.

Muhammad Imran Shah bin Misman 2016239762 The above-quoted case illustrated the principle that Section 91 of the Evidence Act 1950 excludes extrinsic evidence to be adduced of the contents of a document except the document itself. The case further ruled that even if the evidence of negotiations were admitted because the action raises a question of rectification, or misrepresentation, the court should not allow itself to be influenced by that evidence when it comes to construing the agreement.

Now, to establish a collateral contract, there are three conditions that must be fulfilled. The first condition is a collateral contract must exist side by side with the main contract, but it is an independent contract. In Tan Swee Hoe Co Ltd v Ali Hussain Brothers, the appellants orally agreed to allow the respondents to occupy their premises for as long they wished on payment. Two written tenancy agreements were executed, but these did not refer to the oral agreement. Later, a dispute on rent arose the parties and the appellants issued the respondent with a notice to vacate the premises. The respondents argued that under the agreement, they were allowed to stay in the premises for as long as they wished so long as they paid the rent. The court held that a collateral contract exists. An oral promise given at the time of contracting, which induces a party to enter into the contract devices does not offend the parol evidence rule because the oral promise is not imported into the main agreement.

a collateral contract must override any inconsistent written term. What is mean to overrides the inconsistent written term is that the collateral contract contradicts a written term in the main contract. In Tan Chong & Sons Motor Co (Sdn) Bhd v Alan McKnight, the representations made by the appellants’ salesman that the car complied with the Australian Design Regulations were in conflict with condition printed on the reverse side of the Buyer’s Order signed by the respondent. The condition stated that no warranty was given by the company. On this issue, Salleh Abas FJ stated that the representations made must be given an overriding effect and the printed condition must therefore be rejected. Therefore, not all oral evidence can easily be regarded as collateral contract

In Kandasami v Mohamed Mustafa, the Privy Council agreed with the findings of the trial judge that a written agreement entered into between the parties was not binding on the parties as the parties had intended to be bound only by the oral agreement entered into earlier. The Privy Council held that collateral contract exists whereby the parties had agreed that the written document will have no legal effect on them.

Muhammad Imran Shah bin Misman 2016239762

Lastly, it cannot destroy the main contract. A collateral contract cannot destroy the written contract entirely, as it can only exist if there is a written contract. In Industrial & Agricultural Distribution Sdn Bhd v Golden Sands Construction Sdn Bhd, the defendant purchased two excavators from the plaintiff. After two months, the defendant wanted to return it, and alleged that there was an oral collateral warranty by the plaintiff that if the excavators were unsuitable, the defendant could return it without any financial liability. The plaintiff then brought a claim for damages for, inter alia, the depreciation value of the excavators during the two-month period. The High Court held that the defendants had failed to establish that collateral contract existed because the oral assurance will then destroy the main contract.

Besides that, as mentioned above, a collateral contract is said to be used to overcome the parol evidence rule. In Malaysia, the parol evidence rule is provided under Section 91 and Section 92 of the Evidence Act 1950.

Section 91 of evidence act states that, evidence of terms of contracts, grants and other dispositions of property reduced to form of document. When the terms of contract or of a grant or of any other disposition of property have been reduced to the form of a document, no evidence shall be given in proof of the terms of the contract or other disposition or of the matter itself except the document itself. The rule provides that where a contract is reduced into writing, it is presumed that the writing contains all the terms of it and evidence will not be admitted of any previous or contemporaneous agreement which would have the effect of adding extra terms or clauses to the agreement, add to the written agreement in any way, or modify its terms. In Teo Siew Peng v Guok Sing Ong, the ground of appeal was that the judge erred in law in excluding the evidence of the oral agreement alleged by the Appellant. The court admit that it settled law that an option is a unilateral contract which does not become binding on the grantor of the option until the exact terms of the option are complied with. And an option to purchase land is a contract which is required by law to be in writing with the purchaser is precluded by section 92 of the evidence act from proving that the parties had orally agreed.

Muhammad Imran Shah bin Misman 2016239762 However, Parol evidence rule is exceptional, when this rule admit the possibility of other unwritten or oral factors which might affect the contract. Section 92 (a) of evidence act provides that, any fact may be proved which would invalidate any document or which would entitle any person to any decree such as fraud, illegality and etc. Evidence can be shown that a specific terms in a contract was a mistake. For example if a number is missing from dollar amount or if a term was misspelled, previous document could be introduced to rectify these mistakes. These evidence are to show that the contract was formed under fraud, duress or some otherwise tortious conduct that could render the contract invalid. In the case of Tan Siew Hee v Hii Sii Ung the principle was oral evidence of a failure consideration in a contract is admissible under proviso (a) of section 92. The court in this case held that, the defense case here is that there was complete want of consideration alleged by the plaintiffs and therefore such a want of consideration as invalidates the agreement Exhibit 1, and it is plain that under proviso (a) to section 94 (Singapore) of the evidence ordinance evidence attempting to support that case is admissible.

Section 92 (b) provides that, the existence of any separate oral agreement, as to any matter on which a document is silent and which is not inconsistent with its term, may be proved and in considering whether or not this proviso applies, the court shall have regard to the degree of formality of the document. Under this proviso, an oral agreement as to any matter on which the original document is silent and which is not inconsistent with its term. This principle was upheld in the case Chase Perdana Berhad v Md Afendi bin Hamdan, the respondent was supposed to have agreed orally is in direct contradiction to the appearing in the letter of undertaking and the agreement and is not a term which the original document is silent. The letter of undertaking and the agreement required that the relevant authorities’ approvals be obtained whilst the so called oral agreement is supposed to have waived this condition. The proviso (b) in section 92 of the Evidence act therefore cannot apply in this case. When the exception does not apply then the terms appearing in the letter of undertaking continue to be applicable.

Section 92 (c) provides that, the existence of any separate oral agreement constituting a condition precedent to the attaching of any obligation under any such contract, grant or disposition of property, may be proved.

Muhammad Imran Shah bin Misman 2016239762 Section 92 (d) states that, the existence of distinct subsequent oral agreement, to rescind or modify any such contract, grant or disposition of property, may be proved except in cases in which the contract, grant or disposition of property is by law required to be in writing, or has been registered according to the law in force for the time being as to the registration of documents.

In conclusion, upon any parties enter into a contractual agreement, the court will presumes that all the essential terms and provision are set out and thus it’s binding over the parties. And if the parties had disputes and brought to court, the court will not accept any evidence that would change the fundamental basis of the contract in any ways which is the parol evidence rule. However this rule is exceptional where court accepts when the parties give verbal evidence in certain circumstances where there is ambiguity, mistake and etc....