The parol evidence rule is tricky. The rule provides that a court cannot look to extrinsic evidence–words or conduct beyond the terms themselves–to alter or add to a written agreement that was intended by the parties to be the final expression of their deal. Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 343. The parol evidence rule protects the integrity of written contracts by making their terms the exclusive evidence of the parties’ agreement.
However, the rule has one important exception: the court may consider extrinsic evidence to show that the agreement was procured by fraud. Code Civ. Proc., § 1856, subd. (g). In other words, fraud trumps the rule.
In Riverisland Cold Storage, Inc. v. Fresno-Madera Production Credit Assn. (2013) 55 Cal.4th 1169, 1174–1175 (Riverisland), the California Supreme Court reaffirmed the continued validity of this so-called “fraud exception.” In so doing, the Court finally (and expressly) overruled its prior decision in Bank of America etc. Assn. v. Pendergrass (1935) 4 Cal.2d 258 (Pendergrass) which had limited or narrowed the fraud exception, sowing confusion among the courts and litigators.
Based on Riverisland, litigants will have an easier time challenging the enforceability of contracts tainted by fraud.