In the case of Raffles v. Wichelhaus (1864) 159 Eng.Rep. 375,
the seller agreed to sell cotton to the buyer. Shipment was to made from
Bombay on the ship named Peerless. However, there were two ships named "Peerless."
One was to sail in October and the other in December. Defendants intended
to accept the cotton on the ship that sailed in October and refused to accept
the cotton on the ship that sailed in December. It was held by the court
that there was no binding or enforceable contract. The rule of the Peerless
case is that no contract arises unless both parties have the same meaning
in mind. I.e., there must be agreement on the same thing. (Rest.2d §20).
General Rules of Contract Interpretation
Meaning of Contract Ascertained From
4 Corners of Instrument Where contract language is clear and explicit
and does not lead to an absurd result, a court will ascertain contractual
intent from the written provisions of the contract itself and go no further.
(
Cal.Civ. Code §§ 1638, 1639.)
Contract Construed Most Strictly Against
Drafter Any ambiguities caused by the drafter of the contract must be
resolved against the drafter or the party employing him or her. (
Cal.Civ.Code §1654; United States v. Seckinger, 397 U.S. 203 (1970)).
Words Used Given Their Ordinary Meaning
The words of a contract generally are to be understood in their ordinary
and popular sense unless the parties use them in a technical sense or a special
meaning is given to them by usage. (Cal.Civ.Code § 1644.)
"Usage of Trade"
(See, UCC 1-205
) Technical words in a contract must "be interpreted as usually understood
by persons in the profession or business to which they relate, unless clearly
used in a different sense." (
Cal.Civ. Code §1645).
Omitted Terms
What happens when the parties omit a term
from their contract? Rest.2d § 204 provides that when the parties omit
a term from their contract which is essential to the determination of their
rights the court will supply a term which is reasonable. If the contract
is for the sale of goods Article 2 of the UCC provides for a number of statutory
terms to be used to fill gaps in the contract when missing terms cannot be
supplied through resort to course of performance, course of dealing or usage
of trade. By setting forth statutory terms, the Code supplies the commonly
accepted term on the matter and prevents the contract from failing for lack
of a reasonable basis for enforcement. In case of conflict statutory terms
are subordinated in rank to course of performance, course of dealing, and
usage of trade.
Parol Evidence Rule
Where the parties have reduced their agreement
to final written form, evidence of prior or contemporaneous agreements is
inadmissible to vary or contradict the terms of the final written agreement.
(
Cal.Code.Civ.Proc. § 1856(a), see also Rest.2d § 213
Cal.Civ.Code § 1625 &
UCC 2-202) The thrust of the parol evidence rule is that if the court
finds the writing to have been intended as a complete and exclusive statement
of the terms of the parties' agreement, then the writing alone constitutes
the contract and evidence of prior negotiations or "side agreements" will
not be resorted to in interpreting the final written agreement.
When the parties to a written contract
have agreed to it as an "integration"--a complete and final embodiment of
the terms of an agreement-- parol evidence cannot be used to add to or vary
its terms.
The crucial issue in
determining whether there has been an integration is whether the parties
intended their writing to serve as the exclusive embodiment of their agreement.
Proof of a collateral oral agreement (which would show that the agreement
is not integrated) is admissible if it is such an agreement as might naturally
have been made a separate agreement under the circumstances.
(Masterson v. Sine, 68
Cal.2d 222, 436 P.2d 561 (1968).)
When only part of the agreement is integrated,
the same rule applies to that part, but parol evidence may be used to prove
elements of the agreement not reduced to writing.
Exceptions to the Rule A written
contract may be conditioned on an oral agreement that the contract shall not
become binding until some condition
precedent resting in oral or extrinsic evidence shall have been performed.
(Burke v. Dulaney, 153
U.S. 228, 14 S.Ct. 816, 38 L.Ed. 698 (1894)
The Plain Meaning Rule
The plain meaning rule states that if a
writing, or the term in question, appears to be plain and unambiguous on
its face, its meaning must be determined from the four corners of the instrument
without resort to extrinsic evidence. Both Professor Corbin and the Restatement
Second have rejected the plain meaning rule. Corbin says that all relevant
extrinsic evidence is admissible on the issue of meaning including evidence
of subjective intention and what the parties said to each other with respect
to meaning. (See Rest.2d § 214(c).) This is true even if there is an
integration and there is no ambiguity. However, the trial judge must initially
decide whether the asserted meaning is one to which the language taken in
context, is reasonably susceptible in the light of all the evidence. If it
is not then that asserted meaning may not be attached to the language in
question. (See Rest.2d §§ 210 and 215.)
When parties set down their agreement in a clear, complete document, their writing, should as a rule be enforced according to its terms. (W.W.W. Associates, Inc. v. Giancontieri, 77 N.Y.2d 157, 566 N.E.2d 639 (1990).) The test of admissibility of
extrinsic evidence to explain the meaning of a written instrument is not whether
it appears to the court to be plain and unambiguous on its face, but whether
the offered evidence is relevant to prove a meaning to which the language
of the instrument is reasonably susceptible. (PG&E v. G.W. Thomas Drayage & Rigging Co., 69 Cal.2d 33, 442
P.2d 641 (1968).)
© 2010 by lawschoolhelp.com and Craig A. Smith
|
