Is Your Agreement Worth the Paper it is Written On?

California Supreme Court logoThe California Supreme Court recently answered that question with a resounding “No”.  In one of its early decisions in 2013, Riverisland Cold Storage vs. Fresno-Madera Production Credit Association, the Court rejected what had previously been a long standing exception (since 1935) to what is known as the “parol evidence rule”.  In brief, the parol evidence rule restricts one’s ability to present evidence, in certain situations, that would contradict, alter or add to the terms of a written agreement.

The situation involved a couple who feel behind on their loan payments.  They entered into an agreement which involved the lender agreeing not to take any enforcement action provided they continued to make the newly agreed upon payments.  A representative of the lender told the couple, among other things,  they would have a two year extension on the loan.  When the couple was presented with the mountain of paperwork for them to sign which documented the agreement (which they, not uncommonly, did not read), the actual additional term was three months.

Ultimately the couple sued the lender, claiming that they had been defrauded in that they were told something contrary to what was in the agreement they signed.  The Supreme Court, in a break from precedent that had been in effect for more than 75 years, held the couple could proceed with their claim.  The court did note though that the burden of proving the necessary elements of their claim was significant.

If you have a question regarding this decision or a specific agreement, you can contact our Contract Attorney in Woodland Hills at Anker, Hymes & Schreiber, LLP.

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