Under the parol evidence rule, which statement is correct regarding use of a document to interpret a contract?

• A. Prior written terms that vary the contract
• B. Oral statements that contradict the written agreement
• C. Parol evidence may not be used to interpret ambiguity
• D. A document that clarifies an ambiguity in the contract

Answer: (D)

Parol evidence allows a document to help interpret an agreement when the contract language is unclear. If a contract is ambiguous, extrinsic documents may be admitted to explain or clarify what the terms mean, rather than to add new terms or contradict the written agreement. That’s why a document that clarifies an ambiguity in the contract is the correct use of parol evidence.

Evidence of prior written terms that would vary the contract is generally not admissible if the contract is integrated, and oral statements that contradict the written agreement are not allowed to alter its terms. Also, the rule does not say parol evidence may not be used to interpret ambiguity; in fact it is precisely allowed for interpretation.