Contracts
I. Contract Interpretation
A. Express Terms
Rule: When a term(s) of the contract or the contract itself is vague/ ambiguous/ ambiguous syntax/ conflicting, using either the Formalist or the Contextualist Approach the court employs a variety of “rules” of construction to interpret the parties’ intent as to the meaning of the contract
Objective Test Approaches (analyze using both):
1. Formalist – words have set/plain meanings, words are not ambiguous
a. Unless the contract is ambiguous, there is no submission of extrinsic evidence
b. look to the four corners of the document
c. minority approach
2. Contextualist – words in an of themselves do not have a fixed meaning and can only be understood in context
a. Contract (any kind) does not have to be ambiguous for the submission of extrinsic evidence
b. Majority approach
Analysis
Process of Analysis
(1) properly identify the term(s) at issue or issue with the contract(2) lay out how each party is interpreting the term or contract(3) identify approach and use the rules of construction to interpret parties’ intent
Rules of Construction (use for formalist and contextualist)
1. A word’s meaning is affected by the words around it or in the series2. A general term joined with a specific one will be deemed to include only things that are like the specific one 3. The expression of specific things/item and the exclusion of others limits the term to that list of things/items4. The court favors interpretations that makes a contract valid over invalid5. Court favor interpretation that favor the non-drafter, for they have less bargaining power6. Interpret contract as a whole7. Purpose of the parties8. Specific provision is exception to a general one9. Handwritten or typed provisions control printed provisions (preferred over boilerplates)10. Public interest is preferred
Policy
· Criticism of Formalist: too strict, may interpret contract in a way parties never intended
· Criticism of Contextualist: if weight is not given to what’s written on the pages of the contract then it would undermine everything under
ligation on the seller to use best efforts to supply the goods and the buyer to use best efforts to promote their sale.
Analysis
· Course of Performance trumps Course of Dealing
· Course of Dealing trumps Trade Usage
· UCC has a much broader interpretation of agreement – goes further than the “four corners of the document”
· POLICY: courts want to determine K’s by filling in the gaps as to what the parties’ INTENDED when they made the K
· REMEMBER: The above things are always implied in contracts UNLESS they contradict the K If a party does not use good faith or best efforts, it is considered a BREACH of that Kv
C. Parole Evidence
Intro
· POLICY: Courts will give preference to the WRITTEN agreement and assume that what the parties’ agreed to is embodied in the K. (The K governs everything)
