differently (as by omitting the formula). Due to these features of the immediate context, the court held that request was to be understood as demand, founded on right, for purposes of that case.54

§ 5.2.2. The Whole Contract

The Pillsbury Co., Inc. v. Wells Dairy, Inc.,55 an Iowa trial court case in which the author served as an expert consultant, illustrates a court’s resolution of a sentence ambiguity from within the four corners of the contract document as a whole. A trade secret owner and distributor of ice cream had concluded a contract with an ice cream manufacturer for the production of Häagen-Dazs® frozen dessert products at the manufacturer’s plant. The contract required the manufacturer to produce minimum quantities. During the contract’s term, the plant was destroyed when a check valve in a pipeline of the ammonia refrigeration system failed, causing ammonia to spill onto the floor of the plant. An explosion occurred and fires ignited, causing extensive physical damage to the plant. A shutdown resulted, and the manufacturer was unable to produce any Häagen-Dazs at the plant for some time. The distributor brought an action against the manufacturer for breach of contract, seeking lost profits.

The contract contained a force majeure clause that said, in part:

Neither party will be liable for delays or suspension of performance

. . . caused by acts of God or governmental authority, strikes, accidents, explosions, floods, fires, or the total loss of manufacturing facilities or any other cause that is beyond the reasonable control of that party (“Force Majeure”) so long as that party has used its best efforts to perform despite such Force Majeure.56

The manufacturer argued that this clause excused its duty to perform because the failure to perform was caused by an explosion, a fire, and a total loss of manufacturing facilities. The distributor argued to the contrary that the explosion, fire, and loss were not “beyond the reasonable

54Id.

55Ruling on Wells Dairy Motion for Summary Judgment against Pillsbury, Iowa District Court for Plymouth County, Law No. LACV029916 & LACV029523, April 17, 2006. [While this book was in press, the Supreme Court of Iowa reversed on questionable grounds. The Pillsbury Co., Inc. v. Wells Dairy, Inc., No. 05/06 7002, slip op. at 19 (Iowa July 11, 2008).]

56Id. at 1–2.

control” of the manufacturer; therefore, the force majeure clause did not ground an excuse. The manufacturer responded that the clause, “that is beyond the reasonable control” of the manufacturer, modified only “any other cause,” not the preceding list of specifically enumerated force majeure events.57

The clause suffers from sentence ambiguity as between these two interpretations. The court held that the manufacturer’s argument was correct as a matter of law. (After discovery was complete, neither party relied significantly on extrinsic evidence.) The court gave five arguments to support its holding.

First, the court relied on the rule of the last antecedent.58 This rule of grammar requires that a limiting clause be interpreted as modifying its immediate antecedent, not remote antecedents. The immediate antecedent to the clause, “that is beyond the reasonable control of ” is the phrase, “any other cause.” The remote antecedents were on the list of specifically enumerated force majeure events. Therefore, the court held, ‘[t]he rule of the last antecedent requires that the phrase ‘that is beyond the reasonable control of ” modifies only the immediate antecedent, ‘any other cause.’”59

Second, the court relied on two converse canons of construction.60 One provides that a contract should be interpreted in a way that gives all of its provisions some effect.61 The other says that all of a contract’s language should be given effect so as to avoid rendering part of it unnecessary and meaningless.62 The court found that the distributor’s argument created a redundancy because the list of enumerated force majeure events included acts of God, strikes, and acts of a governmental authority. Yet these events would be outside either party’s control under any circumstances. By contrast, if the clause “that is beyond the reasonable control” modifies only the last antecedent, “any other cause,” there would be no redundancy. Therefore, the manufacturer’s argument was more persuasive.

57Id. at 3.

58Id. at 9 ((citing Winthrop Resources Corp. v. Eaton Hydraulics, Inc., 361 F.3d 465, 470 (8th Cir. 2004)).

59Id. at 9.

60Id. at 9–10.

61Id. ((citing Current Technology Concepts, Inc. v. Irie Enterprises, Inc., 530 N.W.2d 539, 543 (Minn. 1995)).

62Id. at 9 ((citing Casey v. Bhd. of Locomotive Firemen and Enginemen, 268 N.W. 737, 739 (Minn. 1936)).

Third, the court relied on a basic rule of grammar that requires a predicate verb to agree in number with its subject.63 Under the distributor’s argument, there would be no such agreement. If the clause “that is beyond the reasonable control of a party” modifies the specifically enumerated force majeure events, the sentence would read, in effect: “[A]cts of God . . . that is beyond the reasonable control of [the manufacturer]; strikes . . . that is beyond the reasonable control of [the manufacturer]; explosions . . . that is beyond the reasonable control of [the manufacturer],” etc. By contrast, reading the clause to modify only “any other cause” produces subject-verb agreement—“any other cause that is beyond the reasonable control of a party.”

Fourth, the court relied on the rule that ambiguous provisions will be construed against the drafter.64 This is a default rule, not a rule of interpretation, because it does not bear on the parties’ intention but, rather, on which party is at fault for the ambiguity.65 Nonetheless, though there were some negotiations, the court found that the distributor was the primary drafter.

Fifth, the court relied on another provision of the document as it revealed the parties’ intention when they made it.66 The contract provided that either party could terminate for any cause two years after written notice given after the expiration of its initial term (an eight-year period). It also provided, in the force majeure clause following the language quoted above, that the distributor could terminate immediately if the manufacturer was unable to produce for more than sixty consecutive days due to a force majeure event. According to the distributor’s interpretation, should a fire occur for reasons that were within the manufacturer’s reasonable control, the distributor could not terminate until the term had expired and two further years (after notice) had elapsed. There would be no force majeure event to justify invoking the immediate termination provision. By contrast, the manufacturer’s interpretation would allow the distributor to terminate immediately after a sixty-day hiatus because a force majeure event would have occurred. The court found that it was “hard pressed to believe that the parties intended [the distributor’s] result.”67

63Id. at 10.

64Id. at 11 ((citing Hilligoss v. Carroll, Inc., 649 N.W.2d 142, 148 (Minn. 2002)).

65Klapp, 663 N.W.2d at 456. See § 5.3.2.

66Ruling on Wells Dairy Motion for Summary Judgment against Pillsbury, supra note 55, at 11 ((citing Midway Center Assocs. v. Midway Center, Inc. 237 N.W.2d 76, 78 (Minn. 1975)).

67Id. at 11.

probably had in mind. The same evidence, plus testimonial evidence of the course of negotiations, allows the interpreter to draw inferences about the parties’ subjective intentions when agreeing to the changes and when concluding the contract.

In Stroud v. Stroud,69 the divorcing parties to a property settlement agreement disputed the proper interpretation of a clause providing for termination of the wife’s right to support payments. The clause said that the payments would cease, among other things, upon the wife’s “cohabitation with a person in a situation analogous to marriage.”70 An issue was whether the word person in the context of the agreement referred only to males or also to females. The court found that the word was ambiguous based on an “objectively reasonable standard.”71 It resolved the ambiguity by holding that person included females.

In doing so, the court did not rely on the ordinary or dictionary meaning of person. Instead, it relied on a change that the husband made to a draft. The draft had provided that payments would cease upon the wife’s “cohabitation with a male in a situation analogous to marriage.”72 The husband testified that he had scratched out “male” and put in “person,” and he had submitted the draft to his attorney, who submitted it to the wife’s attorney. The wife signed the final text, which said “person.” The court relied on this negotiating history, together with the wife’s testimony about her practical construction of the agreement, to reach its conclusion.

The give-and-take of negotiations also can ground inferences as to the parties’ subjective intentions without focusing on a specific governing term. In Sound of Music Co. v. Minnesota Mining & Mfg. Co.,73 a written contract between a dealer and a provider of background music said that the contract would continue in force for some years, but that it could be terminated sooner under some circumstances. One of the circumstances in which the contract allowed early termination was described in §15.0(D):

15.0. TERMINATION. This Agreement may be terminated by the parties as follows: . . .

D. Upon [the manufacturer’s] exit from the business by sale, divestiture, assignment of assets, or any other manner of exit, or any

69641 S.E.2d 142 (Va.App. 2007).

70Id. at 145.

71Id. at 145.

72Id. at 146 (emphasis added).

73477 F.3d 910 (7th Cir. 2007).

other material transfer of ownership of the Equipment or Music Service portion of either party’s business upon twelve (12) months’ advance written notice.74

Because it was exiting the background music business, the provider gave more than twelve months’ written notice of termination. Upon termination, the dealer brought an action for breach of contract, alleging that the provider could not terminate unilaterally under § 15.0(D). The dealer argued that that section was introduced by language referring to termination by “the parties,” in the plural. Further, §§ 15.0(A)–15.0(C) said expressly that “either party” could terminate under the circumstances specified in those sections. Section 15.0(D), by contrast, did not by its terms empower “either party” to terminate. From this, the dealer asked the court to infer that § 15.0(D) required both parties to agree to an early termination should the manufacturer exit from the business. The provider, by contrast, argued that § 15.0(D) allowed it to terminate unilaterally upon the requisite notice.

The court rejected the dealer’s claim. The prefatory language in § 15.0, consisting of “the parties,” was ambiguous in the court’s view because it could mean either party or both parties.75 The requirement of twelve months’ advance notice in § 15.0(D), moreover, would not be necessary if a party could simply decline to agree to a proposed termination.76 In addition, extrinsic evidence of the negotiations showed that the provider had offered a draft of the contract providing that it could terminate early upon ninety days’ advance notice should it leave the background music business. The dealer proposed that the provision be removed entirely or that sixty months’ notice be required. The provider would not agree to either counterproposal, but after some back-and-forth negotiations, the parties settled on twelve months of notice.77 By focusing on the notice period in this way, it would seem that the dealer accepted the provider’s right to terminate unilaterally. Consequently, the court resolved the ambiguity in favor of the provider.

An interpreter should take care to consider the course of negotiations in their broader context. Negotiations typically require a “package deal” before a party consents to be bound. An agreement reached on one provision may be superseded by subsequent negotiations on that provision.

74Id. at 915–16.

75Id. at 916–17.

76Id.

77Id.