Supreme Court of California - 68 Cal. 2d 222
In Masterson v. Sine (1968), a significant case in contract law, the California Supreme Court examined if a ranch buyer could change a contract option to repurchase the ranch through an oral agreement with the seller. The case centered on a dispute about whether the modification was valid and enforceable.
Dallas Masterson and Rebecca Masterson sold their ranch to Medora and Lu Sine. The deed allowed the Mastersons to repurchase the ranch within 10 years, and they later claimed they had an oral agreement with Medora Sine to extend this period and reduce the repurchase price. The Sines denied any oral modification.
The trial court ruled in favor of the Mastersons, finding a valid oral modification. It allowed extrinsic evidence, showing both parties intended to modify the contract orally.
The Supreme Court upheld this decision, applying a liberal approach to the parol evidence rule and finding extrinsic evidence admissible. The court also ruled that the statute of frauds didn't apply as the oral modification was supported by new consideration, with both parties giving up something valuable.
This case is significant as it demonstrates a liberal application of the parol evidence rule, and how courts address modifications, statute of frauds, and consideration in contract law. It is frequently cited and discussed in contract law education.
The case involves a ranch with an option to repurchase. The trial court allowed extrinsic evidence to determine the meaning of certain terms and ruled in favor of the plaintiffs. The defendants appealed, arguing that the option provision was too uncertain to be enforced and that extrinsic evidence should not have been admitted. The court held that the trial court properly refused to frustrate the grantors' intention to reserve an option to repurchase and that extrinsic evidence was properly admitted. However, the trial court erred in excluding extrinsic evidence that the option was personal to the grantors and therefore nonassignable. The parol evidence rule aims to balance the policies of written evidence being more accurate than human memory and the fear of fraud or unintentional invention by interested witnesses. The exclusion of evidence of oral collateral agreements should only occur when it is likely to mislead the fact finder, and the credibility of the evidence should be the basis for the rule.
The dissenting opinion disagrees with the majority opinion that allows parol evidence to be admitted to limit an absolute and unrestricted written option. The parol evidence rule prohibits adding to, varying, or contradicting the terms of a writing by extrinsic evidence. The majority opinion's holding is based on false premises and violates California statutes that expressly declare the option to be assignable. The majority opinion subverts the established rule against contradicting or varying the terms of a writing by admitting testimony that potentially leads to fraud by allowing the defendant optionors to limit, detract from, and contradict the plain and unrestricted terms of the written option.
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