ContractsProf Blog

Editor: Jeremy Telman
Oklahoma City University
School of Law

Monday, June 12, 2006

Life Without Parol Evidence: A Utopia?

by Hila Keren (Hebrew-Jerusalem)

Sometimes comparative law allows us to play the "what if" game without taking risks. A recent decision of an enlarged panel of the Israeli Supreme Court may have such an effect; so forget about Anglo-American law for a second and make room for lived experience from afar.

Until a decade ago the Israeli contract law had a norm of interpretation very similar to the American parol evidence rule. Then a revolution took place: in a landmark case called Apropim the Israeli court decided to release itself from firm constrains and to allow the use of any source of information -- be it written or oral, pre-contractual or post-contractual -- in order to learn as much as possible about the shared intentions of the parties to a written contract. As any other revolution this one too raised objections and fears.

Lawyers, for example, were said to have pulled their hair with frustration, because they felt that they could no longer ensure their clients that the contracts they draft for them will be interpreted in a way that follows their texts. After all, it has been said, who knows which wild conclusions the courts may arrive at under this new, flexible, open-ended regime of interpretation. By and large Apropim was taken by scholars as bringing new levels of uncertainty to the domain of contractual interpretation. Some judges were suspicious too. One of them, the powerful Supreme Court Judge Heshin, was worried enough to decide, long after Apropim had become the rule of law, that it calls for re-consideration. Using a special procedure of juridical re-examination which is saved for matters of the highest importance, J. Heshin asked his peers to retrospectively assess whether the intentions-based approach established by Apropim (i.e. no parol evidence rule) was an appropriate dismissal of an unhelpful formality or a precarious mistake of the sort which was anticipated by its opponents.

The much-awaited decision in the case of Megadlei Ha'yerakot was announced only a few weeks ago. It is a collage of nine judicial opinions that, albeit being written from diverse perspectives, all embrace Apropim and admit the value of deserting the former rigid rules of interpretation. J. Proccacia beautifully captured this value when she wrote (unofficial translation from Hebrew):

[The Apropim decision] gently makes a way into the depth of the human dynamics and in a nuanced manner gives the written text its appropriate specific gravity under the circumstances that surrounded the parties' contractual engagement. It creates a harmonious tie between words, written or spoken, on the one hand, and the parties' behavior and the external conditions, on the other hand.

Even skeptical J. Heshin, who wrote an elaborate critique of the possible misuses and abuses of Apropim (which he compares to the risk of a Tsunami), acknowledged the basic logic of Apropim: forsaking the traditional model of interpretation in favor of a more flexible search of the contract's meaning.

For those of us who look critically at the Parol Evidence Rule (as I do in a recent paper), this new development has more than a comparative power, it may also be empowering.

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