11 George Mason School of Law Contracts II Interpretation F.H. Buckley

Integration and Interpretation  Integration: May we look outside a writing to supplement it with additional terms?  Interpretation: May we look outside a writing to interpret the meaning of the words of the writing? 2

Integration and Interpretation  Integration: May we look outside a writing to supplement it with additional terms?  Interpretation: May we look outside a writing to interpret the meaning of the words of the writing?  Which was Masterson at 550? 3

4 Sometimes one just can’t say  Raffles v. Wickelhaus at 579 The Peerless

5 Sometimes one just can’t say  “125 bales of Surat cotton, ex Peerless from Bombay”: Raffles v. Wickelhaus The Peerless

But if one does…  Theories of Literary Interpretation Subjective (Contextualism Objective: New Criticism (Textualism) 6

Literary Interpretation  Subjective Contextualism: Authorial Intention There is a meaning, and it is the author’s meaning To be derived by seeking evidence about his motivation from a knowledge of his background and influences 7

Literary Interpretation  Objective: New Criticism There is a meaning but the author’s intention is irrelevant. Only the words of the text matter.  Wimsatt & Beardsley on the “intentional fallacy” 8

9 Where there is an ambiguity, what are the court’s choices?  External evidence of subjective intent (“contextualism”) 9

10 Where there is an ambiguity, what are the court’s choices?  Plain meaning (“textualism”) 10

Judicial Interpretation  Subjective: Contextualism  Objective: Textualism 11

12 In re Soper 579: “to my wife”  On objective or plain meaning standards, who is the wife? 12

13 In re Soper: “to my wife”  On objective or plain meaning standards, who is the wife?  On subjective or contextualist standards, who is the wife? 13

14 In re Soper: “to my wife”  On objective or plain meaning standards, who is the wife?  On subjective or contextualist standards, who is the wife? To hold otherwise would give the word “a fixed symbol” 14

15 In re Soper 15 “The question of who is one’s wife is at times … a matter of genuine dispute” (per Olson J.)

16 In re Soper  How might Soper have cured the problem? 16

17 In re Soper  How might Soper have cured the problem? “to my wife, Gertrude Whitby Young”  So why didn’t he? 17

18 In re Soper 18 I did not have sex with that woman!

19 In re Soper 19 Oh, you mean THAT woman…

20 In re Soper  How might Soper have cured the problem? “To my wife, Gertrude Whitby Young” So why didn’t he? Does Restatement § 207 assist?  Cf. Olsen’s dissent 20

21 In re Soper  Olson and Olsen…how do you tell them apart? 21

22 In re Soper  Olson and Olsen…how do you tell them apart?  Mary Kate is the anorexic one… 22

23 Pacific Gas 585  What did the indemnity clause state? What does “A indemnifies B mean”? 23

24 Pacific Gas  What did the indemnity clause state? What does “A indemnifies B mean”?  A compensates B for claims asserted by C against B 24

25 Pacific Gas  What did the indemnity clause state? What does “A indemnifies B mean”?  A compensates B for claims asserted by C against B  Qu. A compensates B for losses caused by A? 25

26 Pacific Gas  What did the indemnity clause state? What does “A indemnifies B mean”?  A compensates B for claims asserted by C against B  Qu. A compensates B for losses caused by A  Just how would you expect damage to arise “in any way connected with the performance of this contract”? 26

27 Pacific Gas  What did the indemnity clause state? What does “A indemnifies B mean”?  A compensates B for claims asserted by C against B  Qu. A compensates B for losses caused by A.  What did the trial court hold? 27

28 Pacific Gas  What did the indemnity clause state? What does “A indemnifies B mean”?  A compensates B for claims asserted by C against B  Qu. A compensates B for losses caused by A.  And Traynor? You can see this coming, can’t you? 28

29 Pacific Gas  Traynor as a deconstructionist Primitive faith Magic words Totemistic words 29

30 Pacific Gas  Traynor as a deconstructionist Primitive faith Magic words Totemistic words  Can one draft one’s way around this? 30

31 Pacific Gas  Traynor as a deconstructionist Primitive faith Magic words Totemistic words  Can one draft one’s way around this? Really? 31

32 Alex Kozinski and New Textualism

33 Kozinski and New Textualism The Trident Center, West LA 33

34 Kozinski and New Textualism The Trident Center 34  Completed in 1983, Trident Center consists of two, steel-framed, 10-story office towers containing approximately 383,000 square feet and connected by a five-level parking structure. Trident Center is situated on approximately 3.6 acres of beautifully landscaped common areas rich with tenant amenities.

35 Yeah, right! 35

36 Trident Center  “Maker shall not have the right to prepay for the first 12 years.” 36

37 Trident Center  “Maker shall not have the right to prepay for the first 12 years.” So: Does maker have the right to prepay after four years? 37

38 Trident Center  “Maker shall not have the right to prepay for the first 12 years.” So: Does maker have the right to prepay after four years?  In the event of prepayment resulting from a default the prepayment fee will be 10 percent. 38

39 What happened to interest rates 39

40 Trident Center  Was this between sophisticated parties? 40

41 Trident Center  Mitchell Silberberg & Knupp web site: CORE SERVICES: Commercial Properties Represent purchasers and sellers of commercial property as well as owners, developers, investors and contractors in planning, zoning, entitling, financing, development, construction of commercial, industrial, retail, residential and hotel projects. 41

42 Trident Center  Manat Phelps Law Firm: Manatt's attorneys have a broad background in all areas of real estate, land use and hospitality. Our professionals are among the premier real estate and development advisors in the nation 42

43 Trident Center  Which is dispositive and why? What if Trident stopped making payments to trigger a default? 43

44 Trident Center  This was between sophisticated parties Were they really much less so in Pacific Gas? UAW, Hunt Foods? 44

45 George Mason School of Law Contracts II Interpretation F.H. Buckley

Next day  Scott  Scott  Scott

What has been promised?  First: Is there is a writing? 47

What has been promised?  If there is a writing… Does it have contractual force?  The ticket cases 48

What has been promised?  If there is a writing?  Is it signed? If so, the general presumption of contractual force  Restatement §

What has been promised?  If there is a writing?  Is it signed? If so, the general presumption of contractual force  Restatement § 211 The non est factum exceptions  Restatement § 163  Capacity: Lucy v. Zehmer 50

What has been promised?  If there is a signed writing? Do we look outside the four corners of the document? 51

What has been promised? Writing onlyOral Evidence Terms Interpretation 52

What has been promised? Writing onlyOral Evidence TermsParol Evidence Rule: Burke in Masterman The Four Corners Rule Complete Integration Effective Merger Clauses Interpretation 53

What has been promised? Writing onlyOral Evidence TermsParol Evidence Rule: Burke in Masterman Unintegrated Agreements Partial Integration Traynor on the need to refer to oral evidence to prove intergration The fraud exception Interpretation 54

What has been promised? Writing onlyOral Evidence TermsParol Evidence Rule: Burke in Masterman Unintegrated Agreements InterpretationTextualism 55

What has been promised? Writing onlyOral Evidence TermsParol Evidence Rule: Burke in Masterman Unintegrated Agreements InterpretationTextualismContextualism Traynor in Pacific Gas 56

57 New Textualism  Cf. Kozinski’s critique of contextualism 57

58 New Textualism: Rules vs. Standards  A rule: Except as otherwise provided in this article, the maximum speed limit shall be 55 miles per hour on interstate highways. VA Code §

59 New Textualism: Rules vs. Standards  A standard: Reckless driving; general rule - Irrespective of the maximum speeds permitted by law, any person who drives a vehicle on any highway recklessly or at a speed or in a manner so as to endanger the life, limb, or property of any person shall be guilty of reckless driving. VA Code §

60 New Textualism: Rules vs. Standards  Rules are imprecise—they may be underinclusive: 60 Driving unsafely at 50 mph

61 New Textualism: Rules vs. Standards  Or overinclusive… 61 Richard Petty can drive safely at 150 mph

62 So why do we employ rules? 62

63 So why do we employ rules?  They’re a lot cheaper for the police and the courts 63

64 So why do we employ rules?  They’re a lot cheaper for courts and police  They offer a safe harbor For drivers 64

65 So why do we employ rules?  They’re a lot cheaper for courts  They offer a safe harbor For drivers For business parties 65

66 New Textualism: Rules vs. Standards  Rules v. Standards in Contract Law The Willistonian paradigm of rules 66

67 New Textualism: Rules vs. Standards  Rules v. Standards in Contract Law Corbin and Llewellyn on standards 67 Llewellyn on the judge’s “situtation sense”

68 New Textualism: Rules vs. Standards  Standards in the UCC: UCC § Unconscionability UCC § Parol Evidence UCC § Every contract or duty within this Act imposes an obligation of good faith in its performance or enforcement. 68

69 But what happens when every contract might end up in court?  Assume that a Developer solicits bids for a shopping center from builders, and accepts the low bid  Low Bidder subsequently asks court to accept evidence that the parties agreed that the bid could be adjusted upwards. 69

70 But what happens when every contract might end up in court?  Assume that a Developer solicits bids for a shopping center from builders, and accepts to low bid  Low Bidder subsequently asks court to accept evidence that the parties agreed that the bid could be adjusted upwards.  How does this play out ex ante? 70

71 When does it make least sense to admit oral evidence?

72 When does it make least sense to admit oral evidence?  Idiosyncratic bargains and the court’s information problem

73 When does it make least sense to admit oral evidence?  Idiosyncratic bargains and the court’s information problem  Harsh terms (e.g. cancellation rights in Snyder at 560)

74 When does it make least sense to admit oral evidence?  Idiosyncratic bargains and the court’s information problem  Harsh terms (e.g. cancellation rights in Snyder at 560)  Sophisticated parties (e.g. Pacific Gas)

75 When does it make least sense to admit oral evidence?  Idiosyncratic bargains and the court’s information problem  Harsh terms (e.g. cancellation rights in Snyder at 560)  Sophisticated parties (e.g. Pacific Gas)  Merger clauses

76 When does it make Most sense to admit oral evidence?

77 When does it make most sense to admit oral evidence?  The transaction costs of inclusion? When these are high, courts might be more likely to admit parol evidence

78 When does it make most sense to admit oral evidence?  The transaction costs of inclusion?  Standard terms

79 When does it make most sense to admit oral evidence?  The transaction costs of inclusion?  Standard terms  Unsophisticated parties

80 One-shot vs. repeated dealings  Distinguish the things referred to in Restatement § 203(b) 80

81 One-shot vs. repeated dealings  Restatement § 203(b) Express terms > course of performance, course of dealing, trade usage Course of performance > course of dealing, trade usage Course of dealing > trade usage 81

82 One-shot vs. repeated dealings  Restatement § 203(b) Express terms > course of performance, course of dealing, trade usage Course of performance > course of dealing, trade usage Course of dealing > trade usage  Snyder p. 560: what was the course of dealing? 82

83 One-shot vs. repeated dealings  Frigalment p. 598 What were the express terms? 83

84 One-shot vs. repeated dealings  Frigalment p. 598 What was the trade usage? 84

85 One-shot vs. repeated dealings  Frigalment p. 598 What if the seller had been in the trade for a long period? How would Kozinski have ruled (given the choice)? Or Traynor? 85

86 One-shot vs. repeated dealings  Should constructive knowledge of trade customs be implied?  Sunshine Biscuit at p

87 One-shot vs. repeated dealings  Sunshine Biscuit at p. 615 Grower promised to deliver 95,000 tons and delivered only 60,000 tons. 87

88 One-shot vs. repeated dealings  Sunshine Biscuit at p. 615 Grower promised to deliver 95,000 tons and delivered only 60,000 tons. How is this different from Frigalment? 88

89 Interpretation under UCC §  Does this mandate contextualism? Look at the comments

90 UCC § 2-202(a) and waivers  Do several waivers of contractual rights amount to a course of dealing?

91 UCC § 2-202(a) and waivers  Do several waivers of contractual rights amount to a course of dealing?  Would you expect that waivers are frequent amongst relational parties?

92 Columbia Nitrogen

93 Columbia Nitrogen Columbia Royster Minimum 31,000 tons yr/3 yrs

94 Columbia Nitrogen 604 Buyer agrees to purchase and seller agrees to furnish quantities … on the following terms… Products Supplied Under Contract Minimum Tonnage per year… 94

95 Columbia Nitrogen  Who took the risk of price fluctuations? 95

96 Columbia Nitrogen  Who took the risk of price fluctuations? What did the contract say? What about the escalation clause? How was the merger clause drafted? What did the default clause specify? 96

97 Columbia Nitrogen  Who took the risk of price fluctuations? What was the course of dealing where Royster was the buyer? Trade Usage? 97

98 Columbia Nitrogen  Who took the risk of price fluctuations? What was the course of dealing where Royster was the buyer? Trade Usage? As between the parties, who was in the best position to predict price fluctuations? 98

99 Columbia Nitrogen  Who took the risk of price fluctuations? What was the course of dealing where Royster was the buyer? Trade Usage? Was the express language inconsistent with this? 99

100 Columbia Nitrogen  Who took the risk of price fluctuations? What was the course of dealing where Royster was the buyer? Trade Usage? Do you agree with Vic Goldberg at 613? 100

101 Southern Concrete

102 Southern Concrete Southern Concrete concrete Mableton

103 Southern Concrete 608  How to distinguish from Columbia Nitrogen? 103

104 Southern Concrete  How to distinguish from Columbia Nitrogen? The risk was not a change of price but a change in the quantity buyer would need 104

105 Southern Concrete  How to distinguish from Columbia Nitrogen? The risk was not a change of price but a change in the quantity buyer would need  Who is in the best position to determine that? 105

106 Southern Concrete  How to distinguish from Columbia Nitrogen? 106

107 Southern Concrete  How to distinguish from Columbia Nitrogen? The equities…? Contract default clause? 107

108 Southern Concrete  Evenfield on contractual enforcement Why might a course of dealing not tell us much When is a waiver just a one-shot waiver? 108

109 Southern Concrete  Evenfield on contractual enforcement Why not put the parties to the election of negativing customs and usages? Cf. merger clause at

110 George Mason School of Law Contracts II Interpretation F.H. Buckley

Next week  Scott  Scott  Scott

Should one look to oral evidence? Writing onlyOral Evidence TermsParol Evidence Rule: Burke in Masterman Unintegrated Agreements InterpretationTextualismContextualism Traynor in Pacific Gas 112

113 What about course of dealing, trade custom?  Restatement § 203(b) Express terms > course of performance, course of dealing, trade usage Course of performance > course of dealing, trade usage Course of dealing > trade usage 113

114 Is a via media possible?  Do the parties need the merger clause of p. 614 for their own protection? 114

115 Doppelt, p. 617  Examine UCC The nemo dat quod non habet rule of (1) The exception in (2) 115

116 George Mason School of Law Contracts II Conditions F.H. Buckley