Ninth Circuit Allows Oral Agreement To Supercede Loan Documents

Despite several contractual phrases prohibiting loan documentation from being altered by subsequent agreements, an oral agreement struck between farmers and their loan officer following a crop failure was allowed to supercede their original loan agreement.

In Fanucchi & Limi Farms v. United Agri Products, No. 02-17525 (9th Cir., July 14, 2005) the U.S. Court of Appeals for the Ninth Circuit held that in instances in which a written contract prohibits oral modifications, an oral agreement cannot amend the express written terms. However, the court also held that if the oral agreement amounts to a replacement of the original contract, the oral agreement may supercede the written contract through "novation."