GMSR’s client prevails in a published decision that comprehensively analyzes the governing principles and application of the parol evidence rule

In negotiations over the defendants’ purchase of the client’s family business, the client agreed to accept, as part of the purchase price, $2.5 million in stock of one of the acquiring companies—but he required that the defendants agree to redeem the stock at a fixed price within three years.  For reasons peculiar to the negotiations, this commitment could not be written and instead was made orally.  When the defendants failed to pay, the client sued.  A jury found that the defendants had, in fact, made the oral agreement.  In a follow-on bench trial, the defendants argued that evidence of the oral agreement was barred by the parol evidence rule.  The trial court disagreed; it independently found that there had been an oral agreement, that the deal would not have been made without the oral agreement, and that the oral agreement had been the only way to accommodate the client’s demand for certain repayment.

The Court of Appeal affirmed.  In a comprehensive discussion of the parol evidence rule under both California and Delaware law (which governed two of the three principal transactional documents), the court found that the purchase agreement was not completely integrated and that the oral agreement did not contradict the transactional documents.  These conclusions allowed the trial court to receive evidence of—and to enforce—the oral agreement.

Kanno v. Marwit Capital Partners II, L.P. (2017) 18 Cal.App.5th 987 [Fourth District, Division 3] [published]

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