Friday, September 09, 2011

Parol evidence rule-DOA or still showing signs of life?

Remember when you slept through the discussion of the parol evidence rule in Contracts? If that's you, read on, because a recent Iowa Court of Appeals decision indicates it's still important.

Gemini Capital Group, a buyer of bad debts through mesne conveyances, sued Philip New on an account they'd bought from Sears Roebuck wherein New had obtained a charge account and stopped paying in 2004. At trial, New asserted a statute of limitations defense, alleging that the agreement was an oral contract that is governed by a 5 year limitation.

Gemini disagreed, alleging that the agreement was a written one. To support their argument, Gemini introduced 1) a statement showing New's balance, assignments of the debt through several buyers, and a standard Sears revolving credit terms and conditions document.

The district court found in favor of Gemini and New timely appealed.

Iowa Code section 614.1 governs causes of action. An unwritten contract is governed by a five year statute of limitations and a written contract has a ten year window. However, Iowa case law tells us that if an action is founded on a written contract, the essential facts showing liability must be established by a writing containing the essential elements of the agreement. Without evidence of New's written acceptance of Sears' offer, the action is one to enforce an oral contract, which had a statute of limitations of five years.


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