Opinion ID: 2635294
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Heading: The Memorandum Requirement of the Statute of Frauds

Text: The statute of frauds does not require a written contract; a note or memorandum . . . subscribed by the party to be charged is adequate. (Civ.Code, § 1624, subd. (a).) [5] In Crowley v. Modern Faucet Mfg. Co. (1955) 44 Cal.2d 321, 282 P.2d 33, we observed that [a] written memorandum is not identical with a written contract [citation]; it is merely evidence of it and usually does not contain all of the terms. ( Id. at p. 323, 282 P.2d 33; See also Kerner v. Hughes Tool Co, (1976) 56 Cal.App.3d 924, 934, 128 Cal.Rptr. 839; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 350, p. 397.) Indeed, in most instances it is not even necessary that the parties intended the memorandum to serve a contractual purpose. [6] (Rest.2d Contracts, § 133; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 352, p. 398; see Moss v. Atkinson (1872) 44 Cal. 3,16-17.) A memorandum satisfies the statute of frauds if it identifies the subject of the parties' agreement, shows that they made a contract, and states the essential contract terms with reasonable certainty. (Rest.2d Contracts, § 131; 1 Witkin, Summary of Cal. Law, supra, Contracts, § 353, p. 399.) Only the essential terms must be stated, `details or particulars need not [be]. What is essential depends on the agreement and its context and also on the subsequent conduct of the parties. . . .' (Rest.2d Contracts, § 131, com. g, p. 338.) ( Seaman's Direct Buying Service, Inc. v. Standard Oil Co. (1984) 36 Cal.3d 752, 762-763, 206 Cal.Rptr. 354, 686 P.2d 1158, overruled on another point in Freeman & Mills, Inc. v. Belcher Oil Co. (1995) 11 Cal.4th 85, 88, 44 Cal.Rptr.2d 420, 900 P.2d 669.) This court recently observed that the writing requirement of the statute of frauds `serves only to prevent the contract from being unenforceable' [citation]; it does not necessarily establish the terms of the parties' contract. ( Casa Herrera, Inc. v. Beydoun (2004) 32 Cal.4th 336, 345, 9 Cal.Rptr.3d 97, 83 P.3d 497.) Unlike the parol evidence rule, which determines the enforceable and incontrovertible terms of an integrated written agreement, the statute of frauds merely serve[s] an evidentiary purpose. ( Ibid. ) As the drafters of the Second Restatement of Contracts explained: The primary purpose of the Statute is evidentiary, to require reliable evidence of the existence and terms of the contract and to prevent enforcement through fraud or perjury of contracts never in fact made. The contents of the writing must be such as to make successful fraud unlikely, but the possibility need not be excluded that some other subject matter or person than those intended will also fall within the words of the writing. Where only an evidentiary purpose is served, the requirement of a memorandum is read in the light of the dispute which arises and the admissions of the party to be charged; there is no need for evidence on points not in dispute. (Rest.2d Contracts, § 131, com. c, p. 335, italics added; accord, Seaman's Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at pp. 764-765, 206 Cal. Rptr. 354, 686 P.2d 1158.) Thus, when ambiguous terms in a memorandum are disputed, extrinsic evidence is admissible to resolve the uncertainty. ( In re Marriage of Benson, supra, 36 Cal.4th at p. 1108, 32 Cal.Rptr.3d 471, 116 P.3d 1152; Seaman's Direct Buying Service, Inc. v. Standard Oil Co., supra, 36 Cal.3d at p. 763, fn. 2, 206 Cal.Rptr. 354, 686 P.2d 1158; Beverage v. Canton Placer Mining Co. (1955) 43 Cal.2d 769, 774-775, 278 P.2d 694; Searles v. Gonzalez (1923) 191 Cal. 426, 431-433, 216 P. 1003.) Extrinsic evidence can also support reformation of a memorandum to correct a mistake. (Rest.2d Contracts, § 131, com. g, p. 338; Calhoun v. Downs (1931) 211 Cal. 766, 768-770, 297 P. 548; 1 Witkin, Summary of Cal. Law, supra, Contracts, §§ 355, 356, pp. 403-404.) Because the memorandum itself must include the essential contractual terms, it is clear that extrinsic evidence cannot supply those required terms. (See, e.g., Friedman v. Bergin (1943) 22 Cal.2d 535, 537-539, 140 P.2d 1.) It can, however, be used to explain essential terms that were understood by the parties but would otherwise be unintelligible to others. Two early cases from this court demonstrate that a memorandum can satisfy the statute of frauds, even if its terms are too uncertain to be enforceable when considered by themselves. In Preble v. Abrahams (1891) 88 Cal. 245, 26 P. 99, a written agreement for the sale of land described the property to be sold as `forty acres of the eighty-acre tract at Biggs.' [7] ( Id. at p. 248, 26 P. 99.) The court observed: An agreement not in writing for the sale and purchase of real estate is void. And the description of the property in the written agreement is so entirely uncertain as to render the instrument inoperative and void, unless we can go beyond the face of it to ascertain its meaning. ( Id. at pp. 249-250, 26 P. 99.) To give effect to the agreement, the Preble court relied on extrinsic evidence that another buyer had purchased one 40-acre tract and the defendant had agreed to purchase the remainder. ( Preble v. Abrahams, supra, 88 Cal. at p. 250, 26 P. 99.) We think the evidence makes the subjectmatter sufficiently certain, and that is all that is necessary. Professor Pomeroy says: `It is not strictly accurate to say that the subject-matter must be absolutely certain from the writing itself, or by reference to some other writing. The true rule is, that the situation of the parties and the surrounding circumstances, when the contract was made, can be shown by parol evidence, so that the court may be placed in the position of the parties themselves; and if then the subject-matter is identified, and the terms appear reasonably certain, it is enough.' (Pomeroy on Contracts, sec. 227, note.) ( Preble v. Abrahams, supra, 88 Cal. at pp. 250-251, 26 P. 99, italics in original.) In Brewer v. Horst-Lachmund Co. (1900) 127 Cal. 643, 60 P. 418, a contract was memorialized by two telegrams employing a form of shorthand notation so arcane that [i]f there were nothing to look to but the telegrams, the court might find it difficult, if not impossible, to determine the nature of the contract, or that any contract was entered into between the parties. ( Id. at p. 646, 60 P. 418.) The defendant contended the telegrams were an insufficient note or memorandum to satisfy the statute of frauds. ( Ibid. ) The Brewer court disagreed, stating: [T]he court is permitted to interpret the memorandum (consisting of the two telegrams) by the light of all the circumstances under which it was made; and if, when the court is put into possession of all the knowledge which the parties to the transaction had at the time, it can be plainly seen from the memorandum who the parties to the contract were, what the subject of the contract was, and what were its terms, then the court should not hesitate to hold the memorandum sufficient. Oral evidence may be received to show in what sense figures or abbreviations were used; and their meaning may be explained as it was understood between the parties. ( Ibid. ) Reading the telegrams by the light of the circumstances surrounding the parties, the Brewer court concluded it was clear that they referred to a contract for the purchase of 296 bales of hops on terms understood by the parties. ( Brewer v. Horst-Lachmund Co., supra, 127 Cal. at p. 647, 60 P. 418.) The facts of Brewer were adapted by the drafters of the Restatements as an illustration of a sufficient memorandum for purposes of the statute of frauds. (Rest, Contracts, § 207, com. a, illus. 8, p. 281; Rest.2d Contracts, § 131, com. e, illus. 7, p. 336; and see id., Reptr.'s Note on com. e, p. 340.) Despite this venerable authority, conflicting statements appear in other California cases: The sufficiency of a writing to satisfy the statute of frauds cannot be established by evidence which is extrinsic to the writing itself. (Code Civ. Proc, § 1973.) [8]  ( Franklin v. Hansen (1963) 59 Cal.2d 570, 573-574, 30 Cal.Rptr. 530, 381 P.2d 386.) [9] The preeminent qualification of a memorandum under the statute of frauds is `that it must contain the essential terms of the contract, expressed with such a degree of certainty that it may be understood without recourse to parol evidence to show the intention of the parties.' (5 Browne on Statute of Frauds, sec. 371.) ( Zellner v. Wassman (1920) 184 Cal. 80, 85-86, 193 P. 84; accord, e.g., Seymour v. Oelrichs (1910) 156 Cal. 782, 787, 106 P. 88.) The whole object of the statute would be frustrated if any substantive portion of the agreement could be established by parol evidence. ( Craig v. Zelian (1902) 137 Cal. 105, 106, 69 P. 853; accord, e.g., Seymour v. Oelrichs, supra, 156 Cal. at p. 787, 106 P. 88.) [10] Unless the writing, considered alone, expresses the essential terms with sufficient certainty to constitute an enforceable contract, it fails to meet the demands of the statute. [Citations.] ( Burge v. Krug (1958) 160 Cal. App.2d 201, 207, 325 P.2d 119; Ellis v. Klaff (1950) 96 Cal.App.2d 471, 477, 216 P.2d 15.) Defendants rely on these and similar cases to argue that the Court of Appeal improperly considered extrinsic evidence to determine the meaning of essential but imperfectly stated terms in the memorandum drafted by plaintiff Sterling. To clarify the law on this point, we disapprove the statements in California cases barring consideration of extrinsic evidence to determine the sufficiency of a memorandum under the statute of frauds. The purposes of the statute are not served by such a rigid rule, which has never been a consistent feature of the common law. Corbin observes: Judicial dicta abound to the effect that the writing must contain all of the `essential terms and conditions' of the contract, and it is often said that these must be so clear as to be understood without any aid from parol testimony.' But the long course of judicial decision shows that `essential terms and conditions' is itself a term of considerable flexibility and that the courts do not in fact blind themselves by excluding parol testimony when it is a necessary aid to understanding. (4 Corbin on Contracts (rev. ed.1997) § 22.2, pp. 706-707, fns. omitted.) Some confusion is attributable to a failure to keep clearly in mind the purpose of the statute and the informal character of the evidence that the actual words of the statute require; some is no doubt due to differences in the attitude of the judges as to the beneficence of the statute and the wisdom of its existence. [11] Further, there are differences in the strictness of judicial requirements as to the contents of the memorandum. It is believed that sometimes these apparent differences can be explained by the degree of doubt existing in the court's mind as to the actual making and performance of the alleged contract. The better and the more disinterested is the oral testimony offered by the plaintiff, the more convincing the corroboration that is found in the surrounding circumstances, and the more limited the disputed issue because of admissions made by the defendant, the less that should be and is required of the written memorandum. (4 Corbin on Contracts, supra, § 22.2, p. 709, fn. omitted.) Williston offers similar counsel: In determining the requisites and meaning of a `note or memorandum in writing,' courts often look to the origin and fundamental purpose of the Statute of Frauds. In fact, a failure to do so will often result in a futile preoccupation with the numerous and conflicting precepts and decisions involving the clauses providing for a note or memorandum, and a corresponding failure to see the forest for the trees. The Statute of Frauds was not enacted to afford persons a means of evading just obligations; nor was it intended to supply a cloak of immunity to hedging litigants lacking integrity; nor was it adopted to enable defendants to interpose the Statute as a bar to a contract fairly, and admittedly, made. In brief, the Statute `was intended to guard against the perils of perjury and error in the spoken word.' Therefore, if after a consideration of the surrounding circumstances, the pertinent facts and all the evidence in a particular case, the court concludes that enforcement of the agreement will not subject the defendant to fraudulent claims, the purpose of the Statute will best be served by holding the note or memorandum sufficient even though it is ambiguous or incomplete. (10 Williston on Contracts (4th ed.1999) § 29:4, pp. 437-438, fns. omitted.) [12] The governing principle is: That is certain which can be made certain. (Civ. Code, § 3538; Beverage v. Canton Placer Mining Co., supra, 43 Cal.2d at p. 774, 278 P.2d 694; see also, e.g., Preble v. Abrahams, supra, 88 Cal. at p. 251, 26 P. 99; Alameda Belt Line v. City of Alameda (2003) 113 Cal.App.4th 15, 21, 5 Cal. Rptr.3d 879.) We hold that if a memorandum includes the essential terms of the parties' agreement, but the meaning of those terms is unclear, the memorandum is sufficient under the statute of frauds if extrinsic evidence clarifies the terms with reasonable certainty and the evidence as a whole demonstrates that the parties intended to be bound. Conflicts in the extrinsic evidence are for the trier of fact to resolve, but whether the evidence meets the standard of reasonable certainty is a question of law for the court. ( Phillippe v. Shapell Industries (1987) 43 Cal.3d 1247, 1258, 241 Cal.Rptr. 22, 743 P.2d 1279; Niles v. Hancock (1903) 140 Cal. 157, 163, 73 P. 840.) [13] We emphasize that a memorandum of the parties' agreement is controlling evidence under the statute of frauds. Thus, extrinsic evidence cannot be employed to prove an agreement at odds with the terms of the memorandum. This point was made in Beazell v. Schroder (1963) 59 Cal.2d 577, 30 Cal.Rptr. 534, 381 P.2d 390. There, the plaintiff sought to recover a 5 percent real estate broker's commission under an oral agreement. ( Id. at p. 579, 30 Cal.Rptr. 534, 381 P.2d 390.) The escrow instructions, which specified a 1.25 percent commission, were the memorandum on which the plaintiff relied to comply with the statute. However, he contended the instructions incorrectly reflected the parties' actual agreement, as shown by extrinsic evidence. ( Id. at p. 580, 30 Cal.Rptr. 534, 381 P.2d 390.) The Beazell court rejected this argument, holding that under the statute of frauds, the parol agreement of which the writing is a memorandum must be one whose terms are consistent with the terms of the memorandum. ( Id. at p. 582, 30 Cal. Rptr. 534, 381 P.2d 390.) Thus, in determining whether extrinsic evidence provides the certainty required by the statute, courts must bear in mind that the evidence cannot contradict the terms of the writing.