Written contracts trump oral, Oklahoma Court of Civil Appeals rules

Journal Record, The (Oklahoma City), May 11, 2007 by Janice Francis-Smith

The pen is mightier than the tongue when it comes to contradictory written and oral contracts, the Oklahoma Court of Civil Appeals ruled last week.

Clear Choice Wireless in Tulsa lost its lawsuit against U.S. Cellular, claiming a breach of an oral contract. The court found that the terms of the oral contract as claimed by Clear Choice contradicted the explicit terms of the written contract the parties had signed, and in such cases the written word rules.

Clear Choice had an agreement with U.S. Cellular, in which U.S. Cellular was to pay Clear Choice for producing new cellular activations. According to Clear Choice, the oral agreement was that U.S. Cellular would pay Clear Choice a total of $1 million over 54 months - in installments of $18,500 each - unless Clear Choice failed to produce at least 250 new cellular activations per month. In months in which Clear Choice failed to meet the 250 threshold, the payment would be reduced 20 percent, down to $14,800.

Clear Choice presented evidence that monthly residual payments were made for a time and then stopped; however, none of the payments presented were for the amounts of $18,500 or $14,800, and no evidence connected the variable residual payments to the alleged oral contract.

On the other hand, the written settlement agreement between the parties states that residual payments to the agent will be made for 4 percent of the amount collected from new subscribers. The agreement does not describe any specific payout plan.

Oral contracts are respected by the court, and nothing prevents parties from reaching an agreement that is part written and part oral, the court wrote in a ruling not made available for official publication. But in instances where the written and oral portions of a contract contradict one another, the written portion prevails.

"Under the parol evidence rule, pre-contract negotiations and oral discussions are merged into and superceded by the terms of an executed writing," the court ruled, citing previous cases. "The rule provides that parol evidence cannot vary, modify or contradict the terms of an executed written agreement. The rule fosters an important public policy - the certainty and stability of contracts."

While the court's argument benefited U.S. Cellular regarding the verdict, the same argument prevented U.S. Cellular from collecting attorney fees in the case. The court agreed with U.S. Cellular that the oral negotiations leading up to the written agreement should not be considered by the court.

"In its application for attorney fees, however, it argued that Clear Choice's 'oral contract' with U.S. Cellular, which was the same as the terms discussed in negotiations, was breached and thus it entitled U.S. Cellular to attorney fees," the ruling states. The court affirmed summary judgment for U.S. Cellular but reversed any award of attorney fees.