Opinion ID: 1430776
Heading Depth: 1
Heading Rank: 1

Heading: effect of oral extension agreement

Text: The allegations of the complaint which are relevant to this issue read as follows: Prior to June 1, 1977 [the date provided in the option as the final date for its exercise], plaintiffs and defendant entered into a verbal [sic] agreement to extend the time for exercise of the above option contract up to and including January 1, 1978. Defendant received a valuable consideration for extension of the option in that defendant deferred certain tax liabilities from 1977 to 1978. Plaintiffs, although able to do so, did not exercise their right to purchase the above described real property prior to June 1, 1977, in reliance on the above verbal agreements to extend the time for exercise of the option. The trial court, in its memorandum opinion, reasoned that it was not enough for plaintiffs to allege that they relied on the oral agreement for an extension of time. It is necessary, the court said, to show that the waiver was at the instance and request of the party waiving the agreement in order that such party might obtain a benefit therefrom. This requirement, the court concluded, is found in our decisions in Neppach v. Or. & Cal. R.R. Co., 46 Or. 374, 80 P. 482 (1905), and Osburn v. DeForce, 122 Or. 360, 257 P. 685, 258 P. 823 (1927). The Court of Appeals, in reversing, also cited the Neppach case as well as the more recent decisions in Stevens v. Good Samaritan Hosp., 264 Or. 200, 504 P.2d 749 (1972), and United Farm Agency v. McFarland, 243 Or. 124, 411 P.2d 1017 (1966). Although the parties and the trial court, under the influence of our prior cases, treated this aspect of the case as depending on the applicability of an exception to the statute of frauds or of an estoppel to rely on the statute, we do not believe that this case presents a true statute of frauds problem. As we discuss in more detail below, it is more accurate to frame the issue in terms of waiver of a contract provision and estoppel to later retract the waiver and rely on the strict terms of the contract. Neppach v. Or. & Cal. R.R. Co., supra , appears to be the principal case upon which the trial court relied in considering whether an optionee may successfully assert the terms of an oral modification of an option contract which is within the statute of frauds. In Neppach the plaintiff was purchasing land from the defendant under a written contract calling for installment payments. While the contract was in force, a controversy arose between defendant and a third party over the title to the land. Because of defendant's uncertainty as to whether it would be able to deliver clear title when the full price was paid, its agents agreed with plaintiff that no further installment payments were to be made until the controversy over title was settled. Later, after title was cleared and without allowing the plaintiff a reasonable time in which to make up the payments, defendant notified plaintiff that the contract was canceled because the installment payments had not been made on time. Plaintiff brought an action for breach, and we held that the defendant, under the circumstances, could not rely on the statute of frauds to deny the validity of the oral agreement. Assuming, we said, that the oral agreement was within the statute and therefore void, nevertheless it was relied upon by the plaintiff and the defendant could not thereafter deny its validity to the injury of the plaintiff. 46 Or. at 395, 80 P. 482. In explanation of this holding, we pointed out that the provision in the contract of sale for the time of the payments was for the defendant's benefit and could be waived. Id. We also pointed out that it was the defendant which had requested the extension agreement because of the uncertainty whether, when the plaintiff had made all of the payments, defendant would be able to perform its promise to deliver title. 46 Or. at 396, 80 P. 482. In the opinion we quoted from cases holding that it would be inequitable, and would open the door to fraud, to permit one party to a contract to induce the other to depart from the terms of the written agreement and then, relying on the statute, to insist upon a strict adherence to its terms. 46 Or. at 396-97, 80 P. 482. Neppach, however, contains no suggestion that we believed that the applicable rule is limited to situations in which the oral agreement was made at the request of the party who later asserts the bar of the statute:    The statute of frauds may not be invoked to perpetrate a fraud, nor will a party be permitted to insist upon the statute to protect him in the enjoyment of advantages procured from another, who, relying on an oral agreement, has acted and placed himself in a situation in which he must suffer wrong and injustice if the agreement is not enforced. A party to a contract for the sale of land, who knowingly consents or agrees to a postponement of the performance by the other at the time specified of some stipulation for his benefit, cannot, after the other has acted upon such consent, avail himself of the default, and treat the contract as forfeited, although the performance of the stipulation at the time specified may have been made of the essence of the contract:   . 46 Or. at 397, 80 P. at 487. The facts in some of our later cases are consistent with defendant's position and the trial court's rationale. In Scott v. Hubbard, 67 Or. 498, 136 P. 653 (1913) and United Farm Agency v. McFarland, 243 Or. 124, 411 P.2d 1017 (1966), the modification was induced by the party who later attempted to rely on the statute, and we held that a party who had changed position in reliance on an oral modification could assert the terms of the modification in spite of the statute of frauds. But the opinions do not hold that the right to prove an oral modification and detrimental reliance upon it depends on which party requested it. See also the discussion in Kingsley v. Kressly, 60 Or. 167, 173-174, 111 P. 385, 118 P. 678 (1911). Osburn v. DeForce, 122 Or. 360, 257 P. 685, 258 P. 823 (1927), also contains language which could support the trial court's reading of the Neppach decision. Osburn was an action by an employee to enforce a written contract of employment as orally modified. We held that the defendant was not estopped to claim the benefit of the statute of frauds, ORS 41.580(1). We said that the estoppel principle was well illustrated in Neppach and that, in contrast, the case before us did not contain the necessary elements of estoppel. We pointed out that it was the employee, rather than the employer, who had requested the oral modification of the contract, and that the modification benefited only the plaintiff. No conduct on the defendant's part, we said, induced the plaintiff to seek the modification. 122 Or. at 372, 257 P. at 689. In spite of that language in the opinion, Osburn does not stand for the proposition that reliance on an oral modification of a contract which is within the statute of frauds has no effect unless the modification was requested by the party who later attempts to rely on the statute. The court appears to have based its holding that there was no estoppel upon this premise: The plaintiff had not changed his position in reliance on the oral agreement in such a way that it would be inequitable to enforce the written contract according to its terms. 122 Or. at 373, 257 P. 685. In light of the reasoning in previous and later cases, the suggestion in Osburn that estoppel in this context only operates against a party who requested the oral modification, or induced the other party to request it, is not an accurate statement of the law. Neppach was most recently cited in Stevens v. Good Samaritan Hosp., 264 Or. 200, 504 P.2d 749 (1972), which was an action for breach by an employee against his employer of an alleged oral contract to employ the plaintiff for a period of 15 years. The plaintiff alleged that, with defendant's knowledge, he had abandoned a lucrative business in order to take employment with defendant and that he was financially damaged when defendant discharged him after only five years. Although the case involved an oral agreement rather than an oral modification of a written agreement, we suggested no difference in principle. We held that although the agreement was within the statute of frauds, the complaint was sufficient to withstand a demurrer because the above allegations would permit proof of all the elements of estoppel. We cited, in support of our holding, both Neppach and United Farm Agency v. McFarland, supra , which also involved the oral modification of a written agreement. There is no indication in the opinion that it was necessary for plaintiff to allege that the oral agreement was made at defendant's suggestion or inducement. The defendant in this case has not cited any decisions, and we have found none, in which the elements of estoppel were present but the defendant was nevertheless permitted to rely on the statute of frauds simply because the oral contract or oral modification was not induced by him or not made at his request. The authorities on the law of contracts do not suggest that the operation of the estoppel principle in this context is limited in that fashion. See Restatement, Contracts § 224 (1932); 2 Corbin on Contracts 111-120, § 310 (1950); 3 Williston on Contracts 783-810, § 533A (3d ed. Jaeger 1960). In the cases discussed above we framed the central issue as one involving the statute of frauds. We have spoken at times of an exception to the statute and at times of an estoppel to assert it. The analysis has not always been clear, but it is obvious that this line of cases and the case now before us do not present pure statute of frauds problems. The distinction can be illustrated by contrasting the present case with a hypothetical variation on the same facts. Suppose that plaintiffs alleged a written option to purchase and a later oral agreement, supported by consideration, to extend the option period for one year. Suppose further that they then alleged that before the expiration date provided in the written option defendant had told them that he had changed his mind and would not honor the extension agreement. Suppose, finally, that the only relief plaintiffs sought was a declaration that defendant was obliged to keep the option open for that additional year. Under those circumstances the question would be the enforceability of the oral agreement as such, and we would have to determine whether the oral modification agreement was void as being within the statute of frauds [3] and, if so, whether the plaintiffs' allegations brought the case within some exception to the statute. The case actually before us is different. These plaintiffs are not attempting to enforce an executory oral contract. The contract under which they claim is in writing. Their contention is, in effect, that the optionor has waived one of the provisions of the written agreement  the provision that the option must be exercised, if at all, by a certain date  and that because the plaintiffs, in reliance on that waiver, let that date go by without attempting to exercise the option, the optionor is now estopped to withdraw that waiver and to insist on his rights under the expiration provision of the written option. Corbin discusses this question. He points out that the issue of estoppel to insist upon strict application of contract provisions is the same whether or not the contract is within the statute of frauds. The fact that the estoppel is based in part on an oral modification does not, in his view, require a special approach:    Where `time was of the essence'  that is, where performance by the plaintiff within a specified time was a condition precedent to the defendant's duty to perform his part  if the plaintiff has been caused to delay his performance beyond the specified time by the request or agreement or other conduct of the defendant, the plaintiff can enforce the contract in spite of his delay.   . Where some performance by the plaintiff, not involving the time element, is a condition precedent, and the failure of the plaintiff to render such performance is caused by the defendant and not by the plaintiff's own inability, the failure to perform that condition is not a good defense in a suit upon the contract. This would be so in the cases of contracts not within the statute of frauds; and it is equally so of contracts that are in writing and are required to be so by the statute. Waiver of conditions and estoppel to assert them are subjects that are fully considered in dealing with contracts quite independently of the statute of frauds; and it is not necessary to discuss either `waiver' or `estoppel' at this point. It is only necessary to insist that there is nothing in the statute of frauds to prevent them from being fully operative in the usual way. 2 Corbin on Contracts 112-114, § 310 (1950). (Footnotes omitted.) The results of our own cases support this analysis. When an estoppel to insist on the strict terms of a contract is created by conduct rather than by express waiver, our opinions suggest no concern with whether the contract is or is not within the statute of frauds. [4] Our opinions in the cases cited above discuss the policy behind the statute of frauds, but we can find no indication that the results are different than they would have been had the cases been analyzed simply in terms of waiver and estoppel. [5] Returning to the complaint before us, we hold that the plaintiffs have adequately alleged the necessary elements of estoppel. The complaint alleges that while there was still time for plaintiffs to exercise the written option according to its terms, the parties made an oral agreement to extend the time for its exercise and that the plaintiffs,    although able to do so, did not exercise their right to purchase the    real property prior to June 1, 1977, in reliance on the    verbal agreements   . The complaint also alleges that plaintiffs paid $7,000 for the option to purchase and under the terms of the written option they were to be credited, upon its timely exercise, with at least $5,000 of that payment against the purchase price of the land. Thus, under the allegations of the complaint, the plaintiffs would be able to offer evidence to prove (1) the waiver  defendant's representation that he would permit plaintiffs to exercise the option at any time to and including January 1, 1978, (2) the reliance  that they reasonably relied on that representation, and (3) the damage  that they would be injured as a consequence of that reliance if defendant were permitted to insist on the expiration date provided in the written option. We are now convinced that the statute of frauds plays no independent role in the analysis of cases of this kind. When a party to a written contract asserts that the other party has waived the benefit of a contract provision under circumstances giving rise to an estoppel, the fact that the alleged waiver was in the form of an oral agreement may be significant on the issue of whether it was reasonable to rely on the waiver. It does not, however, raise the problem of the enforcement of an oral contract contrary to the statute of frauds. [6]