Jacobs v Batavia & General Plantations Trust Ltd
High Court
Citations: [1923 J 1972]; [1924] 1 Ch 287.
Facts
The claimant relied on a prospectus written by the defendant Trust when purchasing profit sharing deposit notes in that Trust.
The prospectus stated that the notes would be paid off at 105% in four annual instalments. It also said that on sale of the Trust, the defendant would set aside enough of the proceeds to pay off the notes.
The defendant contracted with a third-party to sell the Trust. They did not give the claimant notice that his right to retain or cash in the notes had become exercisable. The claimant sought an injunction preventing the defendant from using the proceeds of the sale without setting enough aside to pay off the notes. The defendant denied that they were bound by the terms of the prospectus.
Issue(s)
- Did the prospectus form part of the contract terms?
Decision
The court held in the claimant’s favour and granted the injunction. The terms of the parties’ contract was split between the deposit notes and the prospectus. Alternatively, the prospectus was a binding collateral contract. The claimant had provided consideration for the promises in the prospectus by purchasing the notes.
This Case is Authority For…
The parol evidence rule is a presumption against allowing a party to adduce external evidence to contradict or vary the terms of a written contract. However:
- It does not stop the parties from proving that they have entered into other collateral written contracts, even if they add to, contradict or vary the main contract.
- It also does not stop the parties from proving that the contract is a written contract whose terms are spread across multiple documents (as in this case).
Other
The parol evidence rule also does not stop the parties from forming additional, oral collateral contracts. However, an oral contract is only collateral if it is independent from the main contract and does not contradict, add to or vary the terms of the main contract.
