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Standard Box Co. v. Mutual Biscuit Co.

District Court of Appeal of California
103 P. 938 (1909)
ELI5:

Rule of Law:

When a written contract is silent as to a term the law implies, such as a reasonable time for acceptance of an offer, that implied term becomes part of the contract and cannot be contradicted by parol evidence of a different, specific term.


Facts:

  • Standard Box Company (plaintiff) and Mutual Biscuit Company (defendant) had an existing contract for the supply of boxes during 1905.
  • On September 1, 1905, Standard Box sent a written letter to Mutual Biscuit offering an option to continue their contract for one year starting from July 25, 1906, at the same prices with a specified discount.
  • The written option did not state a deadline by which it had to be accepted.
  • On April 18, 1906, the San Francisco earthquake and fire destroyed Mutual Biscuit's factory.
  • On July 25, 1906, nearly eleven months after the option was offered, Mutual Biscuit sent a letter to Standard Box attempting to accept the option and place an order for boxes.
  • Standard Box refused to supply the boxes at the option price, asserting that the offer had expired.
  • Subsequently, between October and November 1906, Standard Box sold boxes to Mutual Biscuit at the current, higher market prices.
  • Mutual Biscuit later refused to pay the full price for these boxes, leading to the lawsuit.

Procedural Posture:

  • Standard Box Co. (plaintiff) sued Mutual Biscuit Co. (defendant) in a trial court to recover payment for goods sold and delivered.
  • Mutual Biscuit Co. filed several counterclaims, alleging breach of an option contract and that payments were made under duress.
  • At trial, the court sustained plaintiff's objection and excluded defendant's proffered evidence of a contemporaneous oral agreement setting a one-year acceptance period for the written option.
  • The jury returned a verdict in favor of Standard Box Co. for the full amount claimed, $1,444.83.
  • The trial court denied Mutual Biscuit Co.'s motion for a new trial.
  • Mutual Biscuit Co. (appellant) appealed the order denying its motion for a new trial to the California District Court of Appeal.

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Issue:

Does the parol evidence rule bar the admission of a contemporaneous oral agreement that establishes a specific one-year acceptance period for a written option that is silent as to the time for acceptance?


Opinions:

Majority - Chipman, P. J.

Yes. The parol evidence rule bars the admission of an oral agreement to establish a specific acceptance period when the written instrument is silent, because the law implies a 'reasonable time' for acceptance. This implied term is part of the written contract and cannot be contradicted by parol evidence. The court reasoned that when an offer does not specify a time for acceptance, the law implies a 'reasonable time' (Civ. Code, § 1587). This legally implied term is as much a part of the contract as its express terms. The parol evidence rule prohibits the use of extrinsic evidence to contradict, add to, or vary the terms of a complete written agreement. Allowing oral testimony of a one-year acceptance period would directly contradict the legally implied term of a reasonable time. The court held, as a matter of law, that the defendant's nearly eleven-month delay in accepting the offer was an unreasonable time, particularly given the changed market conditions in San Francisco following the 1906 earthquake. Therefore, the option had expired, no new contract was formed, and the trial court correctly excluded evidence of the alleged oral agreement.



Analysis:

This decision reinforces the strength of the parol evidence rule, extending its application not just to express written terms but also to terms implied by law. The court clarifies that a written contract's silence on a matter like a deadline does not render it incomplete; rather, the law completes it by implying a 'reasonable' term. This precedent solidifies the principle that parties cannot use prior or contemporaneous oral agreements to alter a written contract's legal effect. It promotes certainty in written agreements by compelling parties to include all essential terms, like specific deadlines, explicitly within the document itself, rather than relying on unwritten understandings.

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