Ch.4.D
Interpretation
1
Interpretation Aids:
Dictionary definition
Inferences from other terms in the contract
Trade custom/usage
Inferences from market conditions/surrounding
circumstances
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Course of performance
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Course of dealing
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Parol evidence
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Interpretive presumptions: i.e., contra
proferentem
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Burden of proof (?)
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PG&E
“indemnify”
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Soper
“wife”
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Frigaliment
“chicken”
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Amtel
or
“directly or indirectly solicit, recruit,
attempt to persuade…to leave”
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Beanstalk
receipts…on
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Oswald “Swiss Coin Collection”
35 percent of “gross
License Agreements”
What is at issue?
What evidence is considered?
Is parol evidence permitted?
Do pre-contractual discussions shed any light on the
issue?
 What does the court find?
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Ch.4.D
Interpretation
4
US Fresh Frozen Chicken, Grade A, Government Inspected, Eviscerated 2 1/2-3 lbs. and 1 1/2-2 lbs.
each all chicken individually wrapped in cryovac,
packed in se-cured fiber cartons or wooden boxes,
suitable for export
75,000 lbs. 2 1/2-3 lbs........
@$33.00
25,000 lbs. 1 1/2-2 lbs........
@$36.50
per 100 lbs. FAS New York
scheduled May 10, 1957 pursuant to instructions
from Penson & Co., New York
(1) Where the parties have attached the same meaning to a promise or
agreement or a term thereof, it is interpreted in accordance with that
meaning.
(2) Where the parties have attached different meanings to a promise or
agreement or a term thereof, it is interpreted in accordance with the
meaning attached by one of them if at the time the agreement was
made
(a) that party did not know of any different meaning attached by the
other, and the other knew the meaning attached by the first party; or
(b) that party had no reason to know of any different meaning attached
by the other, and the other had reason to know the meaning attached
by the first party.
(3) Except as stated in this Section, neither party is bound by the
meaning attached by the other, even though the result may be a failure
of mutual assent.
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But what if they do not agree a meaning?
“Assuming that both parties were acting in
good faith, the case nicely illustrates Holmes'
remark „that the making of a contract
depends not on the agreement of two minds
in one intention, but on the agreement of two
sets of external signs- not on the parties'
having meant the same thing but on their
having said the same thing.’”
“Plaintiff stresses that, although these and subsequent
cables. . . were predominantly in German, they used the
English word “chicken”; it claims this was done because
it understood “chicken” meant young chicken whereas
the German word, “Huhn” included both “Brathuhn”
(broilers) and “Sup-penhuhn”(stewing chicken), and
that defendant, whose officers were thoroughly
conversant with German, should have realized this.”
“Whatever force this argument might
otherwise have is largely drained away by
Bauer's testimony that he asked Stovicek
what kind of chickens were wanted, received
the answer “any kind of chickens,” and then,
in German, asked whether the cable meant
“Huhn” and received an affirmative
response.”
“Defendant makes a further argument based on the
impossibility of its obtaining broilers and fryers at the
33¢ price offered by plaintiff for the 2 1/2-3 lbs. birds.
There is no substantial dispute that, in late April, 1957,
the price for 2 1/2-3 lbs. broilers was between 35 and
37¢ per pound, and that when defendant entered into
the contracts, it was well aware of this and intended to
fill them by supplying fowl in these weights. It claims
that plaintiff must likewise have known the market.”
“Plaintiff must have expected defendant to make
some profit- certainly it could not have expected
defendant de-liberately to incur a loss.”
(1) Words and other conduct are interpreted in the light of all
the circumstances, and if the principal purpose of the parties is
ascertainable it is given great weight.
(2) A writing is interpreted as a whole, and all writings that are
part of the same transaction are interpreted together.
(3) Unless a different intention is manifested,
(a) where language has a generally prevailing meaning, it is
interpreted in accordance with that meaning;
(b) technical terms and words of art are given their technical
meaning when used in a transaction within their technical
field.
“Plaintiff says the 1 1/2-2 lbs. birds necessarily
had to be young chicken since the older birds
do not come in that size, hence the 2 1/2-3
lbs. birds must likewise be young.”
“Defendant notes that the contract called not
simply for chicken but for “US Fresh Frozen
Chicken, Grade A, Government Inspected.‟ It
says the contract thereby in-corporated by
reference the Department of Agriculture's
regulations, which favor its interpretation;”
(4) Where an agreement involves repeated occasions for
performance by either party with knowledge of the
nature of the performance and opportunity for objection
to it by the other, any course of performance accepted
or acquiesced in without objection is given great weight
in the interpretation of the agreement.
(5) Wherever reasonable, the manifestations of intention
of the parties to a promise or agreement are interpreted
as consistent with each other and with any relevant
course of performance, course of dealing, or usage of
trade.
“Plaintiff's next contention is that there was a
definite trade usage that “chicken” meant
“young chicken.””
(4) Where an agreement involves repeated occasions for
performance by either party with knowledge of the
nature of the performance and opportunity for objection
to it by the other, any course of performance accepted
or acquiesced in without objection is given great weight
in the interpretation of the agreement.
(5) Wherever reasonable, the manifestations of intention
of the parties to a promise or agreement are interpreted
as consistent with each other and with any relevant
course of performance, course of dealing, or usage of
trade.
“Finally, defendant relies on conduct by the
plaintiff after the first shipment had been
received.” The cables back and forth.
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So how does the court decide?
“When all the evidence is reviewed, it is clear that
defendant believed it could comply with the
contracts by delivering stewing chicken in the 2 1/23 lbs. size. Defendant's subjective intent would not
be significant if this did not coincide with an
objective meaning of “chicken.”
Here it did coincide with one of the dictionary
meanings, with the definition in the Department of
Agriculture Regulations to which the contract made at
least oblique reference, with at least some usage in the
trade, with the realities of the market, and with what
plaintiff's spokesman had said. Plaintiff asserts it to be
equally plain that plaintiff's own subjective intent was
to obtain broilers and fryers; the only evidence against
this is the material as to market prices and this may not
have been sufficiently brought home.
In any event it is unnecessary to determine that
issue. For plaintiff has the burden of showing that
“chicken” was used in the narrower rather than in
the broader sense, and this it has not sustained.”
In the interpretation of a promise or agreement or a term
thereof, the following standards of preference are generally
applicable: (a) an interpretation which gives a reasonable,
lawful, and effective meaning to all the terms is preferred to an
interpretation which leaves a part unreasonable, unlawful, or
of no effect; (b) express terms are given greater weight than
course of performance, course of dealing, and usage of trade,
course of performance is given greater weight than course of
dealing or usage of trade, and course of dealing is given
greater weight than usage of trade; (c) specific terms and exact
terms are given greater weight than general language; (d)
separately negotiated or added terms are given greater weight
than standardized terms or other terms not separately
negotiated.
In choosing among the reasonable meanings of a
promise or agreement or a term thereof, that
meaning is generally preferred which operates
against the party who supplies the words or from
whom a writing otherwise proceeds.
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In choosing among the reasonable meanings of a
promise or agreement or a term thereof, a
meaning that serves the public interest is generally
preferred.
Hierarchy of evidence of a term’s meaning
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Express terms
Negotiations
Course of Performance
Course of Dealings
Trade Usage
Dictionary or equivalent
Interpretative Aids
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Ch.4.D
Contra Proferentum (read against drafter)
Burden of Proof
Interpretation
27
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CONTRACTS Chapter 4. Contract Interpretation