Meaning of the Agreement à Chapter 5
Contract Interpretation
Terms of Interpretation (focus is intent)
· Ambiguity & Plain Meaning (classical only)
o Plain on it’s fact à 4-corners (Look to contract context only)
§ If terms means different then objective party meaning – ok if parties agree
o Ambiguous (patent or latent) à look to checklist
§ Resolved against drafter
o Omitted à if essential, court will supply reasonable term
· Types of Ambiguity – Patent & Latent
o Patent à Ambiguous on its face
o Latent à Ambiguous in the context of everything else (“to my nephew” – 2 different nephews)
Check List
Language à plain meaning of words (ordinary & popular sense)
· Ex: D countered that conversation confirmed German word for chicken, “Huhn,” was exactly what was wanted
Trade usage
· Ex: Pl says trade usage of chicken is young chicken. D counters that defendants belief to the usage was to the contrary
Government regulation
Economic evidence
· D argues use of Grade A gives way to Dept of Agricultures definition of ‘chicken’
Conduct àBecause course of performance may shed light on intent of parties
· Ex: D claims Pl knew meaning because after getting 1st shipment with old chickens he still let D ship 2nd
Usage by authorities à FDA definition
Dictionary à what does dictionaries say
Frigaliment Importing v. BNS International (361) à insurance contract
· Provisions of Insurance contract should not go against the reasonable expectation of the insured
o Ex: There has to marks on the building
· Tenancy to limit reasonable expectation theory to insurance contracts on but, makes sense to use in other forms
CJ Fertilizer v. Allied Mutual (370) à Insurance Contracts
· Reasonable expectations
· Adhesion Contracts
Parol Evidence
Evidence of Integration (focus in intent to be integrated)
Modern or Classical
· Classical à 4-corners approach
o Plain Meaning/ Objective 3rd Party
· Modern à Look to circumstances/context (oral agreements) Outside evidence à intent to be complete
o 2nd Restatement (Corbin & CISG) à Look at context (oral agreements, etc.)
o UCC 2-202 à Trade usage, course of dealing & performance allowed, who drafted contract
Partial or Complete Integration?
· Partial à Only one component is reduced to writing & is complete
· Complete à this is a compete agreement
Merger Clause (determining integration)
· Clause expressing intent to be complete and integrated
o Classical: Ensures completeness
o Modern: Rebuttable presumption (not necessarily enforceable) – given less weight if standard form
Policy Objectives (4)
· Prevent Pollution (respect writing)
· Incentive to use writing (clearly)
· Judicial economy
· Mis-trust of Juries
· Value of risk should be reflected in insurance premium
Trigger Rule à
Classical
· Contradicting terms à excluded (whether partial or complete)
o Any evidence contradicting the writing is excluded under the parol evidence rule
· Facially Ambiguous à evidence allowed
o Partial & Compl
Remedies
o Fraud, Duress, Mistake
o Promissory Estoppel à judicial resistance
o Collateral agreement (i.e. warranty)
· UCC à Trade usage, course of performance, course of dealings
Thompson v. Libby à Classical Approach
· Evidence of warranty rejected by PE Rule
Taylor v. State Farm (394) à Modern Approach
· Release language & bad faith claims
· Corbin: 2nd Restatement
1.) Even if clear of its face partially or completely integrated
§ PE to determine intent to be completely integrated
o Yes – PE only to explain ambiguous terms – consistent only
o No – Outside evidence to understand terms – inconsistent = ok
Fraudulent Oral Agreements
· Sherrod v. Morrison (410) à Classical Ct.
o Defenses
§ Mutual Mistake
§ Fraud
§ Economic Duress
§ Undue Influence
§ Promissory Estoppel Claim (Sec. 90)
ú Rare, Modern Ct. might allow (Hand)
· UCC 1-102 à Llewellyn
o Liberally construe to promote public policy
o (3) – Agreement
Nanakuli & Rock v. Shell (418) à Obligation to price protect (UCC)
· Trade usage/ course of dealings may sometimes override express terms in practice (actions speak louder then words)
· Good Faith dealings à implied in UCC
