Revisiting the landmark decision in Bank of Australia v. Palmer [1897] AC 540, the principle of parole evidence in contract law.

Bank of Australia v. Palmer [1897] AC 540 is a significant legal case dealing with the principle of parole evidence in contract law. Here's an overview of the case and the concept of parole.

The case involved a dispute between a bank (Bank of Australia) and one of its customers (Palmer) regarding the terms of a promissory note. The claimant made an oral agreement with the defendant, a bank, allowing him to draw down a cheque on overdraft or credit. However, the defendant allegedly breached this agreement by dishonoring a cheque. The defendant relied on a written document that the claimant signed after the agreement was made. The terms of this document were not the same as the terms the parties had previously agreed upon. The claimant had pointed out some of the discrepancies when he signed the document, but the defendant had assured him the deal would work as the parties had orally agreed. The defendant argued that parole evidence prevented the claimant from admitting evidence of the parties' oral conversations to contradict the written document. Issues

The primary issue in the case was whether the parties could introduce evidence of prior oral agreements or negotiations (parole evidence) that were not included in the written contract to interpret or vary the terms of the written agreement.

What is Parole Evidence Rule It should be noted that the parole evidence rule is a common law principle limiting the admissibility of extrinsic evidence (evidence outside the written contract) when interpreting or varying the terms of a written contract.

The rule generally states that when parties have reduced their agreement to a final written contract intended to be the complete and final expression of their agreement, extrinsic evidence cannot be used to contradict, vary, or add to the terms of the written contract.

Rationale In Bank of Australia v. Palmer, the Privy Council upheld the parole evidence rule, ruling that extrinsic evidence of prior oral agreements or negotiations cannot be admitted to contradict, vary, or add to the terms of a written contract if parties have entered into a written contract that appears to be complete and final. Applicability to Uganda's Legal System

Uganda's legal system applies the parole evidence rule, which governs how courts treat written contracts and extrinsic evidence. When parties have a written and signed agreement, the terms of that agreement are considered the complete and binding contract. Therefore, extrinsic evidence cannot be used to contradict, add to, or alter the written terms, as reflected under section 91 of the Evidence Act cap 6. Relatedly, in Lokhandwala v. Hippo Industries Limited and Others (Civil Suit No. 183 of 2017), Justice SSekaana Musa emphasized that the essence of the parole evidence is that parties who have reduced a contract to writing should be bound by the written one. The case reaffirmed the importance of the parole evidence rule in contract law, emphasizing the principle that written contracts are generally presumed to embody the entire agreement between the parties, and extrinsic evidence should not be used to alter or supplement the terms of such contracts unless certain limited exceptions apply. Lord Morris, in this case, also delivered a judgment that banks are not liable for the forged instruments.

Prepared by AKANJUNA CLERKSON LLB3 UCU.