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into account without making any effort to cull them for those that are relevant in the case or to explain what they mean.32 Consequently, the research conducted for this study did not reveal anything that is helpful to a good understanding of how juries are instructed.
§ 5.2. Judicial Resolution of Ambiguity
Recall that the elements recognized by the objective and subjective theories overlap. Both, for example, look at the whole contract and the objective circumstances in order to infer the parties’ intention. The objective theory aims at what a reasonable person would understand the parties’ manifestations of intention to mean, under the objective circumstances. The interpreter attributes this understanding to the parties as their objective intention. The subjective theory, by contrast, treats the contract document as evidence of what was in the parties’ minds: This view assumes that the parties “attached” a meaning or meanings to the contract’s language and thereby constituted its meaning(s).33 The meaning a court or jury will give to the contract document need not be the same under the two theories, though often it will be. Certainly counsel may prove different sets of elements under each theory.
Today, the subjective theory prevails when an interpreter turns to resolving an ambiguity, even in jurisdictions that determine whether there is an ambiguity under the the four corners rule.34 Moreover, because a jury normally is instructed to find the parties’ intention, and the concept of objective intention is more unusual and difficult to grasp, it seems likely that juries generally aim at what was in the parties’ minds. To counter this, legal authorities that follow the objective theory supervise the jury by excluding evidence bearing only on the parties’ subjective intentions.35
There follows a series of illustrations of how judges have resolved ambiguities by using many of the elements of and guides to contract interpretation. Note that a single element rarely determines the result in a case. Rather, each element has weight. It is up to the interpreter to weigh
32E.g., Propet USA, Inc. v. Shugart, 2007 WL 4376201, *7 (W.D.Wash. 2007).
33RESTATEMENT (SECOND) OF CONTRACTS § 201 (1981). See Wick, 54 N.W.2d at 808–09 (Minn. 1952).
34E.g., Baldevon, 871 F.Supp. at 98–99.
35E.g., Cal. Civ. Code § 1644.
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the contending elements as evidenced in the particular case.36 Note also that ambiguities are not always resolved. The evidence may be inadequate to determine the parties’ intention, objective or subjective, non-arbitrarily. In such cases, a court may find that there is no agreement on the point in controversy, even though such a finding results in dismissing the claim for lack of a contract.37 Or, it may imply a term or apply a default rule, as discussed below.38
§ 5.2.1. Ordinary Meanings
Judges often instruct juries to resolve an ambiguity by considering, among other things, the ordinary meanings of the words in the contract—according to general or local usage.39 The generally subjectivist Restatement (Second) supports this objectivist practice, with two exceptions:
Unless a different intention is manifested,
(a)where language has a generally prevailing meaning, it is interpreted in accordance with that meaning;
(b)technical terms and words of art are given their technical meaning when used in a transaction within their technical field.40
The first exception is that the parties’ may attach an extraordinary meaning to a term when they manifest an intention that their contract be so interpreted. This exception will come into play, for example, if the contract includes a definition of the contested term, which definition expresses an extraordinary meaning.41 The second exception is that the parties may use technical terms or terms of art.42 These are terms with extraordinary meanings usually rooted in trade usages or customs. An interpreter may give the words their extraordinary meanings unless the parties
36See § 6.2.1.
37RESTATEMENT (SECOND) OF CONTRACTS § 201(3) (1981). See § 5.3.3
38See § 5.3.1.
39E.g., Pub. Serv. Co. of Okla. v. Home Builders Ass’n of Realtors, Inc., 554 P.2d 1181, 1185 n.9 (Okla. 1976) (citing 15 O.S. 1971 § 160).
40RESTATEMENT (SECOND) OF CONTRACTS § 202(3) (1981). See City of Bismarck v. Mariner Const., Inc., 714 N.W.2d 484, 490–91 (N.D. 2006).
41See Dualite Sales & Serv., Inc. v. Moran Foods, Inc., 190 Fed. Appx, 294, 290 (6th Cir. 2006).
42See §§ 2.2.5; 5.2.7.
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used them in a non-technical sense.43 To be sure, the provision quoted above is not the only rule or standard of interpretation in the Restatement (Second).44 Therefore, it should be regarded as giving ordinary meanings substantial weight rather than conclusive effect.
Some—but surprisingly few—courts rely on dictionaries to determine the meaning of a contract’s words.45 Dictionaries often are not helpful in resolving ambiguities. The resolution of contractual ambiguity turns on the parties’ manifested intentions, understood in light of their context of use, not the dictionary.46 Moreover, most words have two or more dictionary meanings and many serve as two or more parts of speech. Even term ambiguities, therefore, cannot be resolved with recourse to the dictionary alone. Further, many contractual ambiguities are not term ambiguities. Sentence ambiguities, structural ambiguities, and vagueness, in particular, cannot be resolved by looking in a dictionary. In addition, no case has been found that limits an interpreter to choosing among an ambiguous word’s dictionary meanings. Instead, an interpreter must consider the term’s contractual context, whether it be broad or narrow in the relevant jurisdiction. Finally, many courts will subordinate the ordinary meaning(s) of terms to the contract’s purpose.47
The context may show that the contract language expresses an extraordinary meaning even when the parties have not defined the ambiguous term, and it is not a technical term or word of art.48 For example, in Rice v. United States,49 a provider of services contracted to clean certain Navy mess facilities in return for a fixed price. The contract provided:
In the event that there is an increase or decrease in the total number of meals served per month that varies from the estimated monthly total specified in Schedule A . . . by more than 25%, either party may request an adjustment of the contract price.50
43 Flying J Inc. v. Comdata Network, Inc. 405 F.3d 821, 833–34 (10th Cir. 2005);
RESTATEMENT (SECOND) OF CONTRACTS § 202, cmt. f (1981).
44See id. §§ 202, 203.
45See, e.g., Amfac, Inc. v. Waikiki Beachcomber Inv. Co., 839 P.2d 10, 24–25 (Haw. 1992); Southern Farm Bureau Cas. Ins. Co. v. Williams, 543 S.W.2d 467, 469 (Ark. 1976).
46See Bank of the West, 833 P.2d at 552; Amfac, 839 P.2d at 24.
47E.g., Teig v. Suffolk Oral Surgery Assocs., 769 N.Y.S.2d 599, 600 (App.Div. 2003).
48E.g., Sunex Intern. Inc. v. Travelers Indem. Co. of Ill., 185 F.Supp.2d 614, 621 (D.S.C. 2001); Bennett v. Soo Line Ry., 35 F.3d 334, 336 (8th Cir. 1994); Bank of the West, 833 P.2d at 552.
49428 F.2d 1311 (Ct.Cl. 1970).
50Id. at 1313 (emphasis added).
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There followed a formula for calculating such an adjustment. In the event, the number of meals served decreased by more than 25 percent. Without seeking the provider’s agreement, the government deducted from the provider’s payments a sum computed in accordance with the contract’s formula. The provider brought an action for that sum.
The provider argued, in part, that the clause quoted above was permissive or discretionary, not automatic and unilateral. The word request, it urged, necessarily implies that the non-requesting party may grant or deny the thing requested as a matter of discretion. The government argued that the contract language gave it a right to an adjustment automatically upon any decrease in meals of more than 25 percent. It urged that request meant “demand.” Therefore, it argued, the contract did not give the provider any discretion to grant or refuse a request. The language was ambiguous.
The US Court of Claims held for the government by resolving the ambiguity in request on the basis of its contractual context. With respect to its ordinary meaning, the court conceded that:
[t]he word “request” does generally connote asking or soliciting, in response to which assent or permission may or may not be given, as a matter of discretion.51
However, “[f]or the interpretation of such a word as ‘request,’ the context and intention are more meaningful than the dictionary definition.”52 In several contexts, it pointed out, requests are demands. Thus, stockholders may “request” corporate action, grounded on by-laws or articles of incorporation; claimants “request” legal remedies; and testators make “requests” to their executors and trustees.53 All of these requests are mandatory, though politely stated.
In Rice, the court considered several contextual features fixed by the clause as a whole. The contract language stated a clear condition upon the happening of which a request could be made—an increase or decrease in the number of meals served by 25 percent. Furthermore, upon a request, the amount of the increase or decrease in the payment was clearly fixed by the contract’s formula. Had the parties intended that they must negotiate a price adjustment, moreover, the clause would have been drafted
51Id. at 1314.
52Id. See Bank of the West, 833 P.2d at 552.
53Rice v. United States, 428 F.2d 1311, 1314 (Ct.Cl. 1970).