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 Problems of Interpretation aren’t new  “Hoc est corpus meum." 4

Literary and Judicial Interpretation  Subjective Contextualism  Objective  Deconstruction 5

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 6

Literary Interpretation  Subjective: Authorial Intention  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” 7

8 Objectivism and the “New Criticism”  T.S. Eliot, Cleanth Brookes, John Crowe Ransom: only the text matters 8 Cleanth Brookes

Literary Interpretation  Subjective: Authorial Intention  Objective: New Criticism  Deconstruction Any meaning is illusive 9

10 Deconstructionism  The text is devoid of stable meaning: Barthes, Derrida, Paul de Man Privileging the reader (judge) 10 Paul de Man

11 Some Interpretive Problems Are Impacted  “125 bales of Surat cotton, ex Peerless from Bombay”: Raffles v. Wickelhaus The Peerless

12 Where there is an ambiguity, what are the court’s choices?  Just say no: Raffles v. Wichelhaus No discernable common meaning A punitive approach? 12

13 Where there is an ambiguity, what are the court’s choices?  Just say no: Raffles v. Wichelhaus No discernable common meaning A punitive approach?  Plain meaning (“objectivism”) 13

14 Where there is an ambiguity, what are the court’s choices?  Just say no: Raffles v. Wichelhaus No discernable common meaning A punitive approach?  Plain meaning (“objectivism”)  External evidence of subjective intent (“contextualism”) 14

15 In re Soper: “to my wife”  On objective or plain meaning standards, who is the wife? 15

16 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? 16

17 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” 17

18 In re Soper 18 “The question of who is one’s wife is at times a matter of genuine dispute” (per Olson J.)

19 In re Soper  How might Soper have cured the problem? 19

20 In re Soper  How might Soper have cured the problem? “to my wife, Gertrude Whitby Young”  So why didn’t he? 20

21 In re Soper 21 I did not have sex with that woman!

22 In re Soper 22 Oh, you mean THAT woman…

23 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 assist? 23

24 In re Soper  How might Soper have cured the problem? Olson and Olsen…how do you tell them apart? 24

25 In re Soper  How might Soper have cured the problem? Olson and Olsen…how do you tell them apart?  Mary Kate is the intelligent one… 25

26 Pacific Gas  What did the indemnity clause state? What does “A indemnifies B mean”? 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 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 28

29 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”? 29

Karl Llewellyn Courts should have a “situation sense” to understand what parties mean in their contract.

31 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? 31

32 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? 32

33 Pacific Gas  Traynor as a deconstructionist Primitive faith Magic words Totemistic words 33

34 Pacific Gas  Traynor as a deconstructionist Primitive faith Magic words Totemistic words  Can one draft one’s way around this? Really? 34

35 Alex Kozinski and New Textualism

36 Kozinski and New Textualism The Trident Center, West LA 36

37 Kozinski and New Textualism The Trident Center 37  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.

38 Yeah, right! 38

39 Trident Center  “Maker shall not have the right to prepay for the first 12 years.” 39

40 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? 40

41 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. 41

42 Trident Center  Which is dispositive and why? What if Trident stopped making payments to trigger a default? 42

43 New Textualism  Does the Restatement help? Good faith § 205 Contra proferentum §

44 New Textualism  Does the Restatement help? Good faith § 205 Contra proferentum § 206  Interest rates were on everyone’s mind 44

45 New Textualism  Does the Restatement help? Good faith § 205 Contra proferentum § 206  Was this between sophisticated parties? 45

46 New Textualism  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. 46

47 New Textualism  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 47

48 New Textualism  Does the Restatement help? Good faith § 205 Contra proferentum §

49 New Textualism  Does the Restatement help? Good faith § 205 Contra proferentum § 206  But this was between sophisticated parties Were they really much less so in Pacific Gas? UAW, Hunt Foods? 49

50 New Textualism  What do you think of Kozinski’s critique of contextualism? And how does he decide the case? 50

51 New Textualism  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. 51

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

53 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 §

54 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 §

55 New Textualism: Rules vs. Standards  Rules are imprecise—they may be underinclusive: 55

56 New Textualism: Rules vs. Standards  Or overinclusive… 56

57 So why do we employ rules?  They’re a lot cheaper for courts 57

58 So why do we employ rules?  They’re a lot cheaper for courts  They offer a safe harbor For drivers 58

59 So why do we employ rules?  They’re a lot cheaper for courts  They offer a safe harbor For drivers For business parties  The problem of beneficial reliance 59

60 New Textualism: Rules vs. Standards  Rules v. Standards in Contract Law The Willistonian paradigm of rules Corbin and Llewellyn on standards 60

61 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. 61

Karl Llewellyn’s Situation Sense

63 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? 63

64 Eric Posner’s soft vs. hard PER  The transaction costs of inclusion? When these are high, courts might be more likely to admit parol evidence

65 Eric Posner’s soft vs. hard PER  The transaction costs of inclusion? UAW? Pacific Gas? Trident Center? Qu. consumer contracts

66 Eric Posner soft vs hard PER  The transaction cost of inclusion?  The possibility of judicial error? Idiosyncratic bargains?

67 Eric Posner soft vs hard PER  The transaction cost of inclusion? UAW? Pacific Gas? Trident Center?  The possibility of judicial error?  Detailed written contract?  Merger clause?

68 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 68

69 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? 69

70 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  Frigalment p. 598: what was the trade usage? What were the express terms? 70

71 One-shot vs. repeated dealings  Frigalment p. 598: what was the trade usage? What were the express terms? Should constructive knowledge of trade customs be implied?  Sunshine Biscuit at p

72 UCC §  Do several waivers of contractual rights amount to a course of dealing?

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

74 Columbia Nitrogen Buyer agrees to purchase and seller agrees to furnish quantities … on the following terms… Products Supplied Under Contract Minimum Tonnage per year… 74

75 Columbia Nitrogen  Who took the risk of price fluctuations? What was the course of dealing where Royster was the buyer? Trade Usage? Qu. the default clause 75

76 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? 76

77 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? 77

78 Columbia Nitrogen  Who took the risk of price fluctuations? What was the course of dealing where Royster was the buyer? Trade Usage? What about the merger clause?  Contra proferentum? 78

79 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? 79

80 Southern Concrete  How to distinguish from Columbia Nitrogen? 80

81 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 81

82 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? 82

83 Southern Concrete  How to distinguish from Columbia Nitrogen? 83

84 Southern Concrete  How to distinguish from Columbia Nitrogen? The equities…? Contract default clause? 84

85 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? 85

86 Southern Concrete  Evenfield on enforcement What’s left of the contract, otherwise?  Cf merger clause on p. 614 No more boilerplate 86

87 Doppelt, p. 617  Examine UCC The nemo dat quod non habet rule of (1) The exception in (2) 87

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