Interpreting Contract Language

  • Can often use parol evidence to explain/clarify/define terms of written agreement.
    • See Farnsworth Suppl. pp. 218-219 (R.2d §§209-217)
    • Allows parol evidence to show meaning of writing
  • Vagueness/ambiguousness:
    • Vague = unclear at margins, word could go either way
    • Ambiguous = two+ meanings
      • Ambiguity of term (e.g., light = weight vs. light = brightness)
      • Ambiguity of syntax
    • Whose meaning prevails? R.2d §201 (Suppl. p. 216)
      • If parties agree, then that's what the term means (blue can mean red...)
        • See "The Case of John’s Other Wife." (Farnsworth, p. 581)
          • John has two living wives (left one, never divorced her), dies with life insurance purchased after marrying second, insurance company and John both agreed beneficiary is 2nd wife, even though policy only says "wife."
      • Otherwise...
        • The less knowing/more innocent party who didn't know gets benefit of doubt.
        • Ambiguity construed against drafter.
      • R.2d §203(b); §2-208 (hierarchy of interpretation):
        • 1. express terms of contract (include incorporation by reference)
        • 2. course of performance
        • 3. course of dealing (same parties, other deals)
        • 4. trade usage

Raffles v. Wichelhaus
  • Two ships named "Peerless"
    • Ambiguous terms, as two ships named "Peerless" are leaving the same port for the same destination
  • Therefor NO CONTRACT because parties lacked mutual understanding (§201(3)).
    • No basis for decision.
    • No "meeting of the minds."
    • No consensus ad idem (no agreement on this item).
Oswald v. Allen
  • Two sets of coins, seller wants out. Court decides no basis for deciding between two (thus vague), thus no contract. §201(3).
W.W.W. Associates v. Giancontieri
  • Wants to use extrinsic evidence to interpret (or perhaps contradict?) the language of the contract.
  • Up to court to decide whether the agreement needs such clarification/additions.
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