Ch.

7: Understanding Contractual Obligations: Interpretation

A. Implied Terms—Unspoken Understandings and Expectations

1. Trade Practices, Community Norms, and Other Regular Routines

Nanakuli Paving and Rock Company v. Shell Oil Company Inc.
C/a: Nanakuli raised an action against Shell for breach of contract because
Shell failed to price protect them from inflation. The price of asphalt went
from $44 to $76.
Conclusion: Viewing the evidence as a whole, there was substantial
evidence to support a finding by reasonable jurors that Shall breached its
contract by failing to provide protection for Nanakuli 1974.
Rule (1): Trade usage is to be used to reach the commercial meaning of
the agreement by interpreting the language as meaning what it may fairly
be expected to mean to parties involved in the particular transaction in a
given locality or in a given vocation or trade.
Application (1): This language indicates that Shell would be bound not
only by usages of sellers of asphalt but by more genealr usages on Oahu,
as long as those useages were so regular in their observance that Shell
should have been aware of them. A party is always held to conduct
generally observed by members of his chosen trade because the other
party is justified in so assuming unless he indicates otherwise.
Rule (2): Under the UCC (§490:1-205)… Agreement means the bargain
of the parties in fact as found in their language or by implication from
other circumstances including course of dealing or usage of trade or
course of performance as provided… Course of dealings is more important
that usages of trade between the two parties to the contract. Course of
dealing controls usae of trade. The court must allow a check on usage
evidence by demanding that it be sufficiently definite and widespread to
prevent unilateral post-hoc revision of contract terms by one party…
members of the trade may do business with a standard clause in forms that
they ignore in practice. If the trade consistently ignores obsolete clauses
at variance with actual trade practices , a litigant can maintain that it is
reasonable that the courts also ignore the clauses.
Application: There fore usage may be used to qualify the agreement
which presumably means to cut down express terms although not to
negate them entirely. Here, the express price term was Shells Posted Price
at time of delivery.
Conclusion: Under these particular facts, a reasonable jury could have
found that price protection was incorporated into the 1969 agreement
between Nanakuli and Shell and that price protection was reasonably
consistent with the express term of seller’s posted price at delivery.

Note- Read Pg 865

Fisher v. Congregation Bnai Yitzhok
C/a:  (Rabbi Fisher) raised an action for breach of contract by the 
(Congregation) in the amoun of $1,100.
S/f: A written contract was entered into on June 26, 1950. As full
compensation for the above services the  agreed to pay the  the sum of
$1,200. The prupose which the  was incorporated is: The worship of
Almighty God according to the faith, discipline, forms and rites of the
orthodox Jewish religion. According to Jewish law, men and women may
not sit together at services in the synagogue. The women sit apart from the
men in a gallery, or they are separated from the men by means of a
partition between the two groups. This seating was modified for seating of
both men and women. When  was informed, he notified  he would not
be able to officiate as cantor because this would be a violation of his
beliefs.  refused to officiate and it was too late to secure other
employment. He brought suit for the balance of the contract price. The
court entered judgment for the  in the sum of $1,100 plus interest. This
appeal follows.
Issue: Whether ancient Hebrew laws may be implicitly applied to the
contract.
Rule: When a custom or usage is once established, in absence of express
provision to the contrary it is considered a part of a contract and binding
on the parties though not mentioned therein, the presumption being they
knew of and contracted with reference to it.
Application: It is clear that the parties contracted on the common
understanding that the  was an orthodox synagogue which observed the
mandate of the Jewish law as to separate seating. That intention was
implicit in this contract though not referred to in the writing, and therefore
must be read into it.
Conclusion: Judgment affirmed.

UCC §1-205 Course of Dealing and Usage of Trade:

(1) A course of dealing is a sequence of previous conduct between the parties to a
particular transaction which is fairly to be regarded as establishing a common
basis of understanding for interpreting their expressions and other conduct.
(2) A usage of trade is any practice or method of dealing having such regularity of
observance in a place, vocation or trade as to justify an expectation that it will be
observed with respect to the transaction in question. The existence and scope of
such a usage are to be proved as facts. If it is established that such a usage is
embodied in a written trade code or similar writing the interpretation of the
writing is for the court.
(3) A course of dealing between parties and any usage or trade in the vocation or
trade in which they are engaged or of which they are or should be aware give
particular meaning to and supplement or qualify terms of an agreement.
(4) The express terms of an agreement and an applicable course of dealing or
usage of trade shall be construed wherever reasonable as consistent with each
other; but when such construction is unreasonable express terms control both
course of dealing and usage of trade and course of dealing controls usage of trade.
(5) An applicable usage of trade in the place where any part of performance is to
occur shall be used in interpreting the agreement as to that part of the
performance.
(6) Evidence of a relevant usage of trade offered by one party is not admissible
unless and until he has given the other party such notice as the court finds
sufficient to prevent unfair surprise to the latter.

2. Best Efforts, Good Faith, and Similar Communal Norms

Good Faith [Rest. 2d. K §205]:

Good faith performance or enforcement of a contract emphasizes faithfulness to
an agreed common purpose and consistency with the justified expectations of the
other party; it excludes a variety of types of conduct characterized as involving
“bad faith” because they violate community standards of decency, fairness or
reasonableness.
Bad faith may be overt or may consist of inaction, and fair dealing may require
more than honesty. A complete catalogue of types of bad faith is impossible, but
the following types are among those which have been recognized in judicial
decisions:
1. evasion of the spirit of the bargain
2. lack of power to specify terms
3. and interference with or failure to cooperate in the other party’s
performance.

Paul Reid and Mary J. Reid v. Key Bank of Southern Maine, Inc.
C/a:  raised seventeen actions against the . A jury trial resulted in one
count for the  and an award of damages. Both parties appealed.
S/f:  approached  for a financing a business which was granted. On
3/2/1979 parties entered in to a $25,000 line of credit agreement. In May
1979  telephoned  and informed him that they would not grant him any
advances under the March agreement.  business collapsed, and he lost
his four vehicles and his home.  filed for chapter 13 then chapter 11 and
his wife suffered emotional problems and drug dependency. The couple
separated for a period of a year and half. The  who is black claimed 
acted in bad faith to limit then terminate their line of credit and their
actions were racially motivated.
P/h: The Jury found for  on the claim for breach based on violation of
good faith and fair dealing. It awarded  $100,000 in compensatory and
$500,000 in exemplary damages; the exemplary damages was struck by
the court. Both parties have appealed.
Issue (1): Whether the  violated an implied covenant of good faith
contained in the March loan agreement.
Rule: Every contract or duty within this Title imposes an obligation of
good faith in its performance or enforcement. Any right or obligation
declared by this title is enforceable by action unless the provision
declaring it specifies a different and limited effect.
Application: We view the Maine court as implicitly recognizing that
contractual relationships of the present nature are governed by a
requirement of good faith performance.
Issue (2): Whether the “demand” provision of the note precludes a good
faith requirement.
Rule: UCC §1-208. Option to accelerate at will: A term providing that one
party or his successor in interest may accelerate payment or performance
or require collateral or additional collateral “at will” or “when he deems
insecure” or in words of similar import shall be construed to mean that he
shall have power to do so only if he in good faith believes that the
prospect of payment or performance is impaired…
Application: Reid had not yet received that sum of money from the bank.
Indeed, he was never to receive the full amount. The “demand” provision
thus cannot represent the beginning and end of the inquiry into the time
term of the contract. The agreement also lists a series of events whose
occurrence would signify that Reid would be in default. The presence of
such conditions in both documents indicates that the agreement could not
simply be terminate at the whim of the parties; rather, the right of
termination or acceleration was subjected to various limitations
Conclusion: Therefore, the documents establishing the loan defeat neither
the legal obligation nor the justifiable expectation of the parties that the
contract be performed in good faith.
Issue (3): Whether, under Maine law, an objective standard, such as the
reasonable person, may only be applied in cases involving the sales of
goods that fall under article 2 of UCC.
Rule: UCC article 9, good faith defined in terms indicating a purely
subjective standard. “Now good faith is defined as honesty in fact. One
acts with good faith, in general, when one acts honestly. Good faith means
that one acts without any improper motivation. One acts with the truth and
not for some ulterior motive that is unconnected with the substance of the
agreement in question when one is acting with good faith.”
Application: The judge ultimately instructed the jury to decide the issue
of good faith under the subjective standard. Honesty in fact is required
under all interpretations of the duty of good faith under section 1-203.
Conclusion: No fatal error in the judge’s instructions.

No evidence of bad business relations. The only evidence was that Reid’s
were black and that is the basis of the court’s decision because the bank’s
only reason to cancel the loan and line of credit was due to the Reid’s race.
In the timing and the manner of the termination of Reid’s line of credit.

Good faith is judged from the subjective point of view.

Simcala, Inc. v. American Coal Trade, Inc.

C/a: ACT () raised and action for breach of contract against Simcala ()
arising from  failure to perform its estimated coal requirements.
P/h: The trial court entered a final judgment in favor of ACT and against
Simcala in the amount of $101,850 in lost profits and $10,690 in interest,
plus costs.
S/f: Simcala issued a purchase order from ACT for 17,500 tons of coal.
The purchase order stated that the order was blanket order for 11998 and
that the above is an approximate quantity and to be shipped as required.
During 1998 Simcala actually purchased only 7,200 tons of coal. The trial
court found that Simcala’s purchase of only 41% of its estimated needs for
the year was unreasonably disproportionate.
Issue: Whether 7-2-306(1) permits buyers purchasing pursuant to a
requirements contract to reduce its requirements to a level unreasonably
disproportionate to an agreed-upon estimate so long as it is acting in good
faith.
Rule: If an estimate off output or requirements is included in the
agreement, no quantity unreasonably is proportionate to it may be
tendered or demanded. Any minimum or maximum set by the agreement
shows a clear limit on the intended elasticity. In similar fashion, the agreed
estimate is to be regarded as a center around which the parties intend the
variation to occur.
Application: Courts interpreting analogous provision allow unreasonably
disproportionate decreases from stated estimates if those decreases are in
good faith emphasize concerns over market impact that would flow from
following the plain meaning of the statute. The plain language of the
section admits only one interpretation—that both unreasonably
disproportionate increases and reductions in estimates are forbidden.
Conclusion: The interpretation supported by the plain meaning of the
language of the statute and by the official comments is that the section
prohibit unreasonably disproportionate decreases made in good faith. The
judgment of the trial court is affirmed.

Woodall, Dissenting:

Under the majority’s interpretation of that section, Simcala is required to

pay to ACT the latter’s anticipated profits on the entire quantity of coal,
which the purchase order clearly indicated was only “an approximate
quantity and to be shipped as required.” Most of the federal and state
courts that have addressed the relevant question “have resolved this issue
in favor of the party in Simcala’s position, holding that unreasonably
disproportionate decreases are permissible so long as the buyer has acted
in good faith, but that unreasonably disproportionate increases are
impermissible.
 Requirements contract. An estimate of needs or requirements. There is a
vagueness as to the amounts.

Peter Dalton v. Educational Testing Services

C/a:  filed an action seeking to prohibit  from canceling Dalton’s
November SAT score and to compel immediate release of the score.
S/f: In May 1991 Brian Dalton took the SAT. Six months later he took the
examination for a second time and his combined score increased 410
points. Upon registering for the November SAT Dalton signed a statement
agreeing to the condition in the New York State edition of the registration
bulletin which reserved to ETS the right to cancel any test score… if ETS
believes that there is reasoning to question the scores validity. Dalton
opted to present additional information to the Board of Review. After
several meetings ETS continued to question the validity of Dalton’s
November score.
P/h: The trial court premised this conclusion on its determination that the
ETS Board of Review members failed to evaluate the information
submitted because they believed Dalton’s presence at the November SAT
to be wholly irrelevant to the handwriting issue and that he could
controvert the Board’s preliminary findings that the score was invalid
solely by taking a retest. The trial court ordered ETS to release the
November SAT score. The Appellate Division affirmed.
Issue: Whether  complied with procedures specified in its contract with
high school senior Brian Dalton in refusing to release his SAT score.
Rule: Implicit in all contracts is a covenant of good faith and fair dealing
in the course of contract performance. Encompassed within the implied
obligation of each promisor to exercise good faith are “ any promises
which a reasonable person in the position of the promisee would be
justified in understanding were included. This embraces a pledge that
neither party shall do anything which will have the effect of destroying or
injuring the right of the other party to receive the fruits of the contract.
Where the contract contemplates the exercise of discretion, this pledge
includes a promise not to act arbitrarily or irrationally in exercising that
discretion. The duty of good faith and fair dealing is not without limits and
no obligation can be implied that would be inconsistent with other terms
of the contractual relationship.
Application: ETS was under no duty, express or implied, to initiate an
external investigation into a questioned score. Dalton triggered this
implied in law obligation on the part of ETS by exercising his contractual
option to provide ETS with information. Dalton heeded the advice of the
in the Procedures for Questioned Scores and tendered numerous
documents that did more than simply deny allegations of wrongdoings or
attest to his good character, such as medical evidence regarding his
physical condition, statements by fellow test-takers, the statement of a
classroom proctor and consistent diagnostic test results. ETS expressly
framed the dispositive question as one of suspected impersonation.
 Because the statements from the classroom proctor and November test-
takers corroborated Dalton’s contention that he was present at and in fact
took the November examination, they were relevant to this issue. Dalton’s
materials fell within ETS’ own definition of relevancy as expressed in its
manual and letter to Dalton.
Holding: Where ETS refuses to exercise its discretion in the first instance
by declining even to consider relevant material submitted the legal
question is whether this refusal breached an express or implied term of the
contract, not whether it was arbitrary or irrational. Here the courts below
agreed that ETS did not consider the relevant information furnished by
Dalton. By doing so, ETS failed to comply in good faith with its own test
security procedures, thereby breaching its contract with Dalton.
Conclusion: Dalton is entitled to relief that comports with ETS’
contractual promise—good faith consideration of the material he
submitted to ETS.

Levine, Dissenting:

The procedures established by ETS are unquestionably fair; they give test
takers whose scores are questioned opportunity after opportunity to
validate their scores. In the end however, ETS as a practical necessity
must be the final arbiter of whether it can honestly certify the validity of a
students score.
ETS was contractually obligated to consider any relevant material that
Dalton supplied the Board of Review. After considering that evidence,
ETS had the stated right to cancel Dalton’s test score if it possessed a
reason to question the score’s validity. Thus, it seems self-evident that
ETS expressly reserved to itself substantial discretion on whether to refuse
to certify a test score.
The uncontroverted evidence accepted by the courts below and the
majority here is that when ETS received the information submitted by
Dalton it did not totally disregard it. Rather, it considered it and judged it
weighty enough to merit further evaluation. Thus, it is undeniable that
ETS responded to the submissions by retaining another handwriting expert
to get a third evaluation of the documents.
In sum, ETS acted within its discretion in continuing the security process
rather than releasing the score after considering and rejecting Dalton’s
evidence.

United Airlines, Inc. v. Good Taste Inc., d/b/a Saucy Sisters Catering
C/a: Saucy raised an action claiming fraud, breach of contract, and breach
of the implied covenant of good faith against United.
P/h: The trial court dismissed the breach of contract claim but allowed the
other claims to be tried. A jury, finding no fraud but a breach of the
implied covenant, awarded Saucy damages.
S/f: On March 19, 1988 United awarded Saucy the catering contract.
United gave Saucy a ninety day notice of termination by which it notified
Saucy that its performance under the Agreement would terminate as of
August 15, 1989. The Agreement was terminated. United’s ninety day
termination notice was in accordance with a no-cause termination
provision found in the Catering Agreement.
Issue: Whether the termination clause is allowed under Illinois laws of
good faith and fair dealing.
Rule: The covenant of good faith and fair dealing is well accepted in
Illinois, and its broad contours are firmly established: the covenant is
implied in every contract. The covenant operates to define the intent of
contracting parties when a contract is ambiguous or when it vests the
parties with broad discretion as to its performance. In cases involving
unambiguous contracts that vest broad discretion in one of the parties, the
covenant operates by constraining that party to exercise its discretion
reasonably and fairly: not arbitrarily, capriciously, or in a manner
inconsistent with the reasonable expectation of the parties. Illinois courts
have never held the implied covenant to require good cause or a legitimate
business reason for terminating a contract with an express no-cause
termination provision. Illinois courts seem to have recognized consistently
that terminable at will contracts are generally held to permit termination
for any reason, good cause or not, or for no cause at all. The prevailing
rule however rationalized, unmistakably favors the provisions of an
express no-cause contract over potentially conflicting demands of the
implied covenant: “The duty of good faith and fair dealing does not
override the clear right to terminate at will, since no obligation can be
implied which would be inconsistent with and destructive of the unfettered
right to terminate at will.”
Application: United’s desire for more advantageous arrangement with
Marriott certainly might not amount to “good cause” for terminating
Saucy’s contract, and from Saucy’s perspective termination might even
amount to arbitrary or capricious conduct, carried out for no legitimate
business reason. The goal of achieving higher profits from a lower bidding
supplier is not itself inherently impermissible and does not amount to
opportunistic advantage taking; neither does reliance on an express at-will
termination clause to attain this goal evince subjective bad faith or amount
to an objectively unfair tactic. Illinois law applies a narrower
interpretation of the implied covenant outside the area of franchise
contracts… holds that the covenant protects at-will employees only when
a termination is inspired by an improper motive, such as a desire to
deprive the employee of health or pension benefits. Terminable-at-will
contracts are generally held to permit termination for any reason, good
cause or not, or for no cause at all. Absent express disavowal by the
parties, the duty of good faith and fair dealing does not override the clear
right to terminate at will, since no obligation can be implied which would
 be inconsistent with and destructive of the unfettered right to terminate at
will.
Conclusion: The trial court as mistaken in ruling that the implied
covenant of good faith and fair dealing might “require both United and
Saucy to exercise the discretion afforded to them by the termination clause
in a manner consistent with the reasonable expectation of both parties.
Saucy could not reasonably expect something other than what it expressly
bargained for.

Matthews, Dissenting:

A different legal inference should be drawn: that either party could

terminate the contract for no cause if the reason for termination was
consistent with the parties’ reasonable expectations.
Rest. 2d K: Every contract imposes upon each party a duty of good faith
and fair dealing in its performance and enforcement.
According to the restatement, good faith enforcement, “emphasizes
faithfulness to an agreed common purpose and consistency with the
justified expectations of the other party. One type of violation recognized
by the Restatement is the abuse of power to terminate the contract. The
Restatement of Contracts uses franchise cases as appropriate examples to
illustrate general rules of contract law. Similarly, the unilateral power of
the franchisor is not a significant distinguishing element. The problem is
that the franchisee—the economically weaker party—must spend large
amounts to begin business and then is at risk of losing the investment
based on the decision of the franchisor—the economically stronger party.
The Covenant is best understood as a way of implying terms in the
agreement. It is a way of honoring the reasonable expectations created by
the autonomous expressions of the contracting parties.
Most cases invoking the obligation to perform in good faith can be
synthesized using the following principle: a party performs in bad faith by
using discretion in performance for reasons outside justified expectations
of the parties arising from their agreement.
Early termination by United motivated by a desire to contract with a
competitor on better terms would have contradicted the justified
expectations of Saucy.

3.Interpreteive Presumptions and Implied Terms

Jeffrey Poole et al v. City of Waterbury et al.

People who are no longer working but who are retired and already earned their
benefits. The city finances deteriorated… they weren’t going to be able to borrow
money. The state was concerned they were going to drag down the whole state of
Connecticut.
Imposed a control board over the city’s finances.  initially sued Union and the
City. The oversight board stepped in as the arbitrator. The city said that the union
 no longer represented retired firefighters and that their widows are no longer
represented nor entitled to healthcare benefits when the firefighter died.
The suit was thrown out and the suit against the committee was maintained.
Best effort, good faith, fair dealing
Unless an agreement is ambiguous you go by the Plain Meaning Rule.
There is no need to supplement it. Unless there is something silly or
unfair.

B. Interpreting Express Terms

1. Parol Evidence Rule

Merger agreements and integration clauses recognize there are considerations or

agreements that were discussed that were not in the written contract, or you
assumed that since you discussed it you didn’t need to write it down. But then
upper management changes and acts differently because they weren’t part of the
original agreement. Integration clauses (this document contains the total, final,
and complete agreement of the parties)—It could be talking about an oral
agreement to adjust the price should the market adjust either up or down.

UCC §2-202: Terms with respect to which the confirmatory memoranda of the
parties agree or which are otherwise set forth in a writing intended by the parties
as a final expression of their agreement with respect to such terms as are
otherwise included therein may not be contradicted by evidence of any prior
agreement or of a contemporaneous oral agreement but may be explained or
supplemented
(a) by course of dealing or usage of trade (section1-205) or by course of
performance (section 2-208); and
(b) by evidence of consistent additional terms unless the court finds the writing to
have been intended also as a complete and exclusive statement of the terms of the
agreement.

If the court decides that the writing was intended to be partially integrated, then
the next issue is whether the offered evidence of a prior or contemporaneous
agreement would contradict the final terms in the writing (in which case it should
be excluded) or whether it would prove supplementary terms (in which case it
should be admitted).

If the court decides that the writing was intended to be fully integrated, the court
must exclude all evidence involving matters that are part of the agreement, unless
the evidence falls into one of the exceptions. Agreements which the court
concludes are separate from the agreement contained in the writing can be proved
and enforced.

The exceptions or limitations to the parol evidence rules are:

 1. evidence is admissible to explain a term even if the writing is integrated
—many courts say that evidence is admissible to explain a term only if the
term is ambiguous or that evidence is admissible only to prove a meaning
to which the writing is reasonably susceptible;
2. evidence of trade usages or of prior dealing between the parties is
always admissible because that evidence is a strong indication of the
unspoken (implied) understandings and expectations between the parties
(UCC §2-202);
3. evidence regarding defenses to the formation and enforcement of the
contract, including incapacity, misunderstanding, mistake,
misrepresentation, duress, undue influence, unconscionability, illegality,
public policy, lack of consideration, and the like should be admissible
even though the writing is integrated. In some cases, however, courts will
reject claimed defenses of misrepresentation on the ground that the alleged
victim should not have relied on the misrepresentation if it was
inconsistent with the integrated writing.

Betaco, Inc. v. Cessna Aircraft Co.

C/a:  filed suit claiming breach of express warranty by the .

S/f: Betco became interested in an aircraft known as the Citation Jet to be
manufactured by Cessna.  sent a cover letter stating that the Jet is faster,
more efficient, and has more range than the Citation I.  signed the
purchase agreement and made a $150,000 deposit on the purchase price of
the Jet. In early 1992  employee went to Cessna’s factory and
determined that the plane had equal or less range than the Citation and
decided to cancel the purchase. Cessna accepted the purchase and offered
to apply  deposit to another plane.  refused a refund and this suit
followed.
Issue: Whether the agreement signed by the parties was a fully integrated
contract containing a complete and exclusive statement of the parties’
agreements.
Rule: Terms with respect to which the confirmatory memoranda of the
parties agree or which are otherwise set forth in a writing intended by the
parties as a final expression of their agreement with respect to such terms
as are otherwise included therein may not be contradicted by evidence of
any prior agreement or of a contemporaneous oral agreement but may be
explained or supplemented
(a) by course of dealing or usage of trade (section1-205) or by course of
performance (section 2-208); and
(b) by evidence of consistent additional terms unless the court finds the
writing to have been intended also as a complete and exclusive statement
of the terms of the agreement.
Application: A clause states that, “this agreement is the only agreement
controlling this purchase and sale, express or implied, either verbal or in
writing, and is binding on Purchaser and Seller and that the agreement
 may not be modified in any way except by written agreement executed by
both parties. If there were substantial discussion preceding Betaco’s
commitment to the purchase of the Jet focusing specifically on the range
of the new jet, one might infer that the signed agreement did not embody
the complete agreement between the parties… Where competing
inferences may be drawn from facts that are otherwise undisputed,
summary judgment is improper.
Conclusion: Reverse the entry of partial summary judgment against
Cessna and vacate final judgment entered in favor of Betaco. This case is
remanded for a factual hearing before the bench on the integration issue…

Merk v. Jewel Food Stores

C/a:  files suit against the Union for breach of its duty of fair
representation and against Jewel for breach of contract.
S/f: Jewel insisted that the CBA contains a most favored nations clause a
provision that would allow it to match the wages of unionized competitors
opening in the Chicago market after the start of contract term. Union
president Fred Burki and two Jewel reps forged a secret deal at an
informal hallway meeting late in the evening of Jan. 23, 1983. The precise
terms of that deal are in dispute. Jewel unilaterally implemented its final
offer, cutting the wages of its employees below levels mandated by the
CBA. District court ordered Jewel to arbitrate. Jewel agreed to award back
pay to its current employees while the Union pledged to relinquish its
unfair labor practice complaint and the district court suit. The settlement
abandoned the  in this case—a class comprising of 2000 Jewel
employees who retired, quit or were fired during the protracted 15-month
battle.
P/h: Invoking the parol evidence rule,  first contested the district court’s
admission of extrinsic evidence regarding the oral reopener to modify the
provisions of the written CBA. The jury determined the CBA was not
integrated and the district court apparently agreed with this conclusion,
upholding the jury’s verdict as supported by the evidence.
Issue: Whether the CBA was fully integrated or partially integrated.
Rule: Whether a writing a fully integrated is generally a question of law to
be resolved by a court. A judge and not a jury should ordinarily answer
this threshold question because it often requires going beyond the four
corners of the written document and scrutinizing the very extrinsic
evidence whose admissibility is at issue. If there seems to be some
circularity in examining the very evidence whose admissibility is at stake
in order to determine its admissibility, it may help to keep in mind that this
examination is made as a matter of law in order to determine whether the
evidence shall go to the trier of fact.
Analysis: The district court entrusted the issue of integration to the jury
because the CBA did not on its face clearly indicate whether it was
intended to incorporate all the terms of the contract. The jury accordingly
heard testimony regarding the oral agreement and concluded that the CBA
 was not intended to be a complete integration of all the parties’
understandings.
Conclusion: We agree that the parties did not intend the written terms of
the CBA to embody their entire agreement, for neither the Union nor
Jewel denies the existence of an additional oral term to the contract.
Because both sides concede that there was an additional oral term to their
contract, it necessarily follows that the written terms of the CBA did not
represent a full integration. To avert industrial strife, collective
bargaining agreements must be more secure than garden variety
contracts. Accordingly, we hold that national labor policy forbids
introduction of prior or contemporaneous secret agreements to contradict
fundamental terms of a ratified collective bargaining contract. This secret
oral reopener is, therefore, inadmissible and unenforceable as a matter of
federal law.

2. The Interpretation of Terms in an Integrated Writing

The rationale for the objective theory of interpretation is that actual subjective
intent is difficult to determine and it is unjust to give significance to secret
intentions. The objective theory, through the reasonable person standard, directs
courts’ attention to outward evidence of intent and purports to protect those who
would rely on such outward manifestations… Formal interpretation assumes that
words have determinate meanings independent of particular contexts… current
law strongly favors contextual interpretation, which presumes that words have
meaning only within a context of social interaction and thus that words must be
interpreted within the context in which they were used.

Edward Patterson:

1. Noscitur a sociis: It is known by its associates.

2. Ejusdem generis: Of the same kind class or nature.

3. Expressio unius exclusio alterius: Expression of one thing is exclusion of

another.

4. Ut magis valeat quam pereat: Courts will always try to validate the purpose of
the parties. That the thing rather may have effect than be destroyed.

5. Omnia praesumuntur contra proferentem: All things are presumed against the
author.

6. Interpret contract as a whole.

7. Purpose of the parties.

8. Specific provision is exception to a general one.

9. Handwritten or typed provisions control printed provisions.

10. Public interest preferred.

John Cheever, Artemis, the Honest Well Digger—Story.

Contextual Meaning
The stated rules do not depend on a preliminary determination of ambiguity.
Rules on usage of trade, course of dealing, and course of performance are
rephrased in the terminology of the UCC. The net effect is to de-emphasize
meaning supplied by rules of construction existing in the law and to direct
attention to the context in which the parties make their agreement.

Pacific Gas v. Drayage

C/a:  appeals from a judgment for  for damages in injury under an
indemnity clause.
Issue: Whether the offered evidence is relevant to prove a meaning to
which the language of the instrument is reasonably susceptible.
Rule: The meaning of a writing can only be found by interpretation in the
light of all the circumstances that reveal the sense in which the writer used
the words. The exclusion of parol evidence regarding such circumstances
merely because the words do not appear ambiguous to the reader can
easily lead to the attribution to a written instrument of a meaning that was
never intended.
Analysis: Although extrinsic is not admissible to add to, detract from, or
vary the terms of a written contract, these terms must first be determined
before it can be decided whether or not extrinsic evidence is being offered
for a prohibited purpose.
Conclusion: The court erroneously refused to consider extrinsic evidence
offered to show that the indemnity clause in the contract was not intended
to cover injuries to  property. Since the clause was reasonably
susceptible of that meaning, the offered evidence was also admissible to
prove that the clause had that meaning and did not cover injuries to 
property. Reversed.

Trident Center v. Connecticut

Frigaliment Importing Co. v. B.N.S.

3. The Reasonable Expectation Doctrine and “Blanket Assent”—

Interpretation of Standard Form Contracts
Ch. 8: Understanding Contractual Obligations: Liability

A. Conditions
Rest. 2d. K. §224:
A condition is an event, not certain to occur, which must occur, unless its non-
occurrence is excused, before performance under a contract becomes due.
§225:
1. Performance of a duty subject to a condition cannot become due unless the
condition occurs or its non-occurrence is excused.
2. Unless it has been excused, the non-occurrence of a condition discharges
the duty when the condition can no longer occur.
3. Non-occurrence of a condition is not a breach by a party unless he is under
the duty that the condition occur.
§226:
An event may be made a condition either by the agreement of the parties or by a
term supplied by the court.
§229: To the extent that the non-occurrence of a condition would cause
disproportionate forfeiture, a court may excuse the non-occurrence of that
condition unless its occurrence was a material part of the agreed exchange.

B. Constructive Conditions, Substantial Performance, and the Rule of Perfect

Tender
Make sure to understand the doctrine of substantial performance.

Ramirez v. Autosport

CASE SUMMARY
PROCEDURAL POSTURE: Defendant challenged a ruling of the New
Jersey Superior Court, Appellate Division, holding that plaintiffs rightfully
rejected tender of a defective van under New Jersey Uniform Commercial
Code, N.J. Stat. Ann. � 12A:1-101 et seq., and awarding plaintiffs the
fair market value of their trade-in.

OVERVIEW: Defendant argued that plaintiffs had breached a contract for

the sale of a camper van by rejecting tender of the van because it had
minor defects, and that they were not entitled to rescind the contract. The
court found that the New Jersey Uniform Commercial Code, N.J. Stat.
Ann. � 12A:1-101 et seq., retained a perfect tender rule, and that
plaintiffs had properly rejected tender of the van within a reasonable time.
The court noted that once plaintiff rejected the van, the burden shifted to
defendant to prove that the defects had been cured. The court found that
because defendant had not done so within a reasonable time, plaintiffs
were entitled to rescind or cancel the contract. The court then found that
the fair market value of their trade-in was the proper remedy rather than
recovery of their trade-in, because the trade-in had been sold to an
innocent third party.
 OUTCOME: The court affirmed the ruling, holding that plaintiffs could
reject tender of the van for minor defects, because the New Jersey
Uniform Commercial Code retained the perfect tender rule, and that they
could cancel the contract, because defendant failed to cure the defects in a
reasonable time.

Taylor v. Johnston

CASE SUMMARY
PROCEDURAL POSTURE: Defendants appealed the judgment of the
Superior Court of Los Angeles County (California) awarding plaintiff
damages for breach of contract.

OVERVIEW: Plaintiff horse owner and defendants, breeder and agents,

contracted to breed plaintiff's two horses with defendants' stallion.
Plaintiff filed suit against defendants for breach of contract claiming that
defendant breeder breached the contract when he sold the stallion to
defendant agents, and that all defendants breached the contract by failing
to breed the horses. The court found for plaintiff based on anticipatory
repudiation and awarded damages. Defendants appealed. The court
reversed holding that defendant breeder remedied his repudiation by
arranging to have defendants’ agents breed plaintiff's horses and plaintiff
agreed to the arrangement. Defendants had not expressly nor impliedly
breached the contracts when plaintiff filed suit because the time for
performance had not yet ended. The fact that plaintiff believed that
defendants were not going to follow through on the contract did not
establish anticipatory repudiation.

OUTCOME: The court reversed, holding that there was no evidence in the
record supporting the trial court's findings that defendants repudiated the
contract and therefore committed an anticipatory breach.

***Recession restores you to the status quo… cancellation just stops the deal***

C. Anticipatory Breach and Related Doctrines

Ch. 9: Changes after Formation: Frustration, Impracticability, and

Agreed Modifications

A. Changed Circumstances
1. Frustration of Purpose
2. Impossibility (or Impracticability) of Performance

B. Agreed Modifications and the Pre-Existing Duty Rule

Ch. 10: Remedies

A. Benefit of the Bargain: Specific Performance

B. Monetary Damages for Breach of Contract

1. Expectation, Reliance, and Restitution Interests
2. Persistent Issues in the Measurement of Expectation Damages
3. Three Limitations on Damages: Certainty, Foreseeability, and Mitigation
4. Contract Terms Regarding Remedies

Ch. 11: Third Party Interests

A. Third Party Beneficiaries

B. Assignment of Rights and Delegation of Duties

1. Assignment of Rights
2. Delegation of Duties, Including “Assignment of a Contract”