If a contract is in writing and final to at least one term (integrated), parol or extrinsic evidence will generally be excluded.
The parol evidence rule would generally prevent Betty from testifying to this alleged conversation because the testimony ($800) would directly contradict the written contract's terms ($1,000).
As a preliminary or threshold issue, the court may first determine if the agreement was in fact totally reduced to a written document or (in US terminology) fully "integrated".
In the case of State Rail Authority of New South Wales v Heath Outdoor Pty Ltd McHugh J held that the parol evidence rule has 'no operation until it is first determined' that all the terms of the contract are in writing.
Evidence of a later communication will not be barred by this rule, as it is admissible to show a later modification of the contract (although it might be inadmissible for some other reason, such as the Statute of frauds).
Similarly, evidence of a collateral agreement - one that would naturally and normally be included in a separate writing - will not be barred.
To put it simply, (1) If the parties intend a complete integration of the contract terms, no parol evidence within the scope of agreement is permitted.
The policy is to prevent lying, to protect against doubtful veracity, to enable parties to rely dearly on written contracts, and for judicial efficiency.
The third and final admissibility rule is that under the UCC § 2-202: Parol evidence cannot contradict a writing intended to be the "final expression" of the agreement integrated but may be explained or supplemented by (a) a course of dealing/usage of trade/ course of performance, and by (b) evidence of consistent additional terms unless the writing was also intended to be a complete and exclusive statement of the terms of the agreement.
Exception 2: parties may have entered into a collateral contract,[12] or are establishing an estoppel,[19] with rectification, condition precedent, the true consideration, ACL, implied terms.
[8][23] The High Court in Electricity Generation Corporation v Woodside Energy Ltd[24] took a different approach to interpreting commercial contracts, considering the "language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract" at the "genesis of the transaction".
This necessarily implies consideration of surrounding circumstances and indicates a broader approach may be adopted by the court in the future.
[18] In the New South Wales case of Saleh v Romanous, it was held that equitable estoppel triumphs common law rules of parol evidence.