As we reflect on 2013, two California decisions stand out as especially noteworthy. While both cases involved real estate contracts, their impact will be felt on nearly all contracts in California. In Riverisland Cold Storage v. Fresno-Madera Production Credit Ass’n, the California Supreme Court overturned a 78-year-old rule that prohibited evidence of oral promises that contradict a written contract. In Maynard v. BTI Group, a standard attorney’s fee provision in a contract between the parties was interpreted very broadly by an appeals court to cover tort claims as well as contract claims.

The California Supreme Court

Restricts the Parol Evidence Rule

In Riverisland Cold Storage v. Fresno-Madera Production Credit Ass’n, 55 Cal. 4th 1169 (2013), plaintiffs fell behind on loan payments and defendant initiated a foreclosure action. The parties agreed in writing that the defendant credit association would take no enforcement action for three months if the plaintiffs made certain payments and pledged eight parcels as additional collateral. Plaintiffs missed the payments but eventually repaid the loan and the defendant dismissed its foreclosure action. The plaintiffs then brought a fraud claim, alleging that the defendant’s vice president told them before they signed the agreement that he would extend the loan for two years in exchange for collateral of two ranches. The plaintiffs claimed that they never read the agreement despite signing it and initialing next to descriptions of the parcels.

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