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10/02/14 It's the Law: Oral Discussions Won't Change Written Contracts

It's The Law

Oral Discussions Won't Change Written Contracts

(10/02/14)

Question:

I recently signed a contract. After I read it carefully, I realized it does not match the agreement I thought I had. Can I change it?

Answer:

Florida follows the parol evidence rule. That rule means that a valid written contract cannot be changed by evidence of a verbal agreement if the verbal agreement was entered at the same time or before the written contract. The rule is intended to stop people from trying to change the terms of a contract after it is entered. But, there are exceptions to the rule.

Interestingly, a written contract can be modified by oral agreement. But, proving oral agreement can be tricky.

When the written contract is result of fraud or other wrongful conduct, a court will allow evidence of oral agreement. This includes fraud, mistake, illegality, duress, undue influence and even a claim that one party changed the written document after it was signed. Evidence of oral representations or agreement is also admissible where a party claims to have been fraudulently induced to enter a written contract. Under these circumstances, evidence of oral representation is allowed even if the contract states that all oral agreements and discussions are merged into the contract and prohibits consideration of oral representations.

Another exception to the parol evidence rule is when the written agreement does not truly reflect the consideration of value exchanged for it. And, if there was an oral understanding that the contract would only be effective upon the occurrence of a specific event, evidence is allowed to show the specific event never took place and the oral agreement concerning it. In that case, one of the parties is actually claiming no contract was ever created.

Perhaps the most common exception to the parol evidence rule is when a contract is ambiguous. In thatsituation, the court will hear evidence of oral representations to cure the ambiguity and hold the parties to their "real" agreement. A claim of ambiguity is not always successful. The recent case of Dirico v. Redland Estates, Inc. is a good example of a failed ambiguity claim.

In Dirico, the parties entered contract for purchase and sale of a 92- acre property for $3.8 million dollars. The buyer needed an extension of time for closing and the parties signed a contract addendum which read "The original deposit of $200,000.00 plus the additional deposit of $38,000.00 shall be released and paid to the seller as consideration for this extension. A non-refundable deposit of $250,000.00 shall be due upon the signing of this addendum. The total non-refundable deposit held in escrow for this contract shall be $250,000.00."

The parties later extended the closing date again via an addendum which included a provision stating the non-refundable deposit, in the amount of $250,000.00, shall be released to the seller immediately as a payment for the extension of this contract. The addendum also provided for an additional non-refundable deposit of $200,000.00 to be paid in monthly installments of $50,000.00 and for all monthly deposits to be released and paid directly to the seller.

The closing was finally scheduled and the buyer claimed credit for $688,000.00 in deposits but the seller would only credit $200,000.00. The buyer refused to close and suit was filed.

The trial court allowed testimony of the true intent of the parties and their lawyers in drafting the addendum. The trial court entered an order finding the seller in breach of contract, awarding the buyer $688,000.00 in deposits plus interest for a total award of approximately $1.3 million dollars. The seller appealed.

The appellate court ruled in favor of the seller. It noted that the addenda plainly stated the money previously held as deposits became payment for extensions of the contract. Consistent with that interpretation, the addenda required that the buyer to establish new deposits to guarantee performance. And, only the last addendum provided that the new monthly deposits, even though released to the seller rather than held in escrow, would serve as credits at closing. Because there was no ambiguity in the contract documents, the appellate court ruled the trial judge improperly allowed extrinsic evidence as to the parties' intent.

Your case may qualify for one of the exceptions to the parol evidence rule. For that reason, you should discuss all facets of your case with an experienced attorney.

By: William G. Morris, Esquire.

William G. Morris is an attorney with offices at 247 North Collier Boulevard on Marco Island, Florida. His practice covers a broad range of subjects, including civil litigation, real estate, business and corporate law, estate planning and probate, domestic relations and contracts. He writes this column periodically with respect to legal matters that frequently affect non-lawyers. The information contained in this column is not intended as legal advice and, of necessity, is generalized. For questions about specific circumstances, the reader should consult a qualified attorney.

Questions for this column can be sent to: William G. Morris, e-mail: wgmorrislaw@embarqmail.com or by fax, (239) 642-0722 or

The Marco Island Eagle Other articles of interest can be viewed at our website, www.wgmorrislaw.com

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