held that the lease obligated the tenant to pay the taxes. The meaning of an ambiguous contract thus can be determined by the subsequent conduct of one party, acquiesced in by the other, before a dispute arises. Such interpretation is objective because it is based on conduct—a manifestation of intention, though an ex post one—that indicates how the parties’ used ambiguous language on the point in question. (A practical construction also may ripen into a waiver or modification.60)

§ 2.3. Subjectivist Elements

The difference between objective and subjective elements lies primarily in the kinds of inferences that an interpreter draws from the contract’s text and contextual facts. Both theories take into account, for example, the circumstances surrounding the making of the contract in question. Subjectivism draws inferences, from all of the circumstances, past and present, and any other relevant evidence, to what the parties had in mind when speaking or hearing, writing, or reading the contract’s language. The Supreme Court of Oklahoma expressed the subjectivist’s credo this way:

In considering this transaction we must place ourselves as far as possible in the position of the parties when the contract was entered into and consider the instrument itself as drawn, its purposes and the circumstances surrounding the transaction, and, from a consideration of all the elements, determine upon what sense or meaning of the terms used their minds actually met.61

Objectivism, by contrast, infers reasonable meaning(s) from the parties’ manifestations of intention in the light of the circumstances, whether or not the meaning(s) reflect what the parties had in mind as the meaning of the terms they used. Objectivism holds that reasonable meanings stem from the parties’ use of language in the objective context and the conventions of language use within that context. It excludes elements that bear only on the parties’ states of mind.62 Subjectivism, by contrast, considers all relevant evidence, including evidence of the elements discussed above

60UCC § 303(f) (2001).

61Altshuler v. Malloy, 388 P.2d 1, 4 (Okl. 1964); see Burkons v. Ticor Title Ins. Co. of Calif., 813 P.2d 710, 716 (Ariz. 1991).

62See, e.g., Ginsberg v. Mascia, 182 A.2d 4, 6 (Conn. 1962).

in this chapter and below in this section. Subjectivism assumes that more context gets an interpreter closer to the parties’ subjective intentions.

§ 2.3.1. Prior Course of Dealing

Especially in commercial relationships, parties may deal with each other through a sequence of similar contracts over time. Prior contracts, and the parties’ conduct in performance of them, may establish a course of dealing that is relevant to interpreting a later agreement in the sequence.63 The UCC defines a course of dealing as follows:

A “course of dealing” is a sequence of conduct concerning previous transactions between the parties to a particular transaction that is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct.64

Unlike a usage of trade—which concerns what parties like those to the contract in question generally understand or do in similar situations—a course of dealing concerns what the parties to the contract in question did together before it was formed. Unlike a practical construction—which concerns what the parties did after concluding the contract in question— a course of dealing concerns what the parties did before the contract in question was concluded. Like a practical construction, however, a course of dealing must be a sequence of conduct over time, accepted without objection.65

For example, in American Federation of State, County and Municipal Employees v. City of Benton, Arkansas,66 a union contract with the City of Benton provided that:

The Employer [the City] shall continue to provide health, accidental death and dismemberment, disability, life and retirement insurance. Employee and employee dependent’s health insurance coverage is set forth in Appendix B.67

63Ray Tucker & Sons v. GTE Directories Sales Corp., 571 N.W.2d 64, 69 (Neb. 1997).

64UCC § 1-303(b) (2001). See also RESTATEMENT (SECOND) OF CONTRACTS § 223(1).

65Kern Oil and Refining Co. v. Tenneco Oil Co., 792 F.2d 1380, 1385 (9th Cir. 1986).

662007 WL 496760, *1 (E.D. Ark. 2007).

67Id.

parties, not what would be a reasonable interpretation of the language in its objective context when it was used. In this respect, it is different from a trade usage or practical construction, both of which may show both a reasonable interpretation and a common basis of understanding. A subjective element bears only on the parties’ states of mind.

§ 2.3.2. The Course of Negotiations

Parol evidence, including evidence of the course of negotiations leading to the contract in question, generally is admissible for the purpose of resolving ambiguities.70 If the evidence or its significance is contested, the question of meaning usually is for the fact-finder, often a jury.71 Because jury deliberations are secret, it is hard to find reported cases that detail how to use evidence of the course of negotiations. Review on appeal is not de novo.

We can suppose, however, that deletions to a draft document can reveal the parties’ subjective intentions when they agree to the text on a subsequently contested issue. If a word or clause or more was deleted, and the parties agreed on a final text omitting that language, the final text does not mean whatever the deleted text provided unless it was removed due to a redundancy. A deletion followed by the addition of substitute language also can reveal the parties’ subjective intentions.72 The addition may broaden or qualify the document’s meaning, so the ambiguity can be resolved accordingly, all else being equal. Solely adding to a draft in itself probably is less significant. The final text contains the added language; there is no point to considering the course of negotiations. An addition takes on significance when the court allows a party to testify as to its intention in making an ambiguous addition, or when the court admits negotiating documents, such as a party’s letter or email, explaining its reason for proposing or accepting an addition. Moreover, the give- and-take of negotiations, though not involving deletions or additions to the specific governing language, can ground inferences as to the parties’ subjective intentions or purposes.73

70See § 3.1.1.

71See § 5.1.

72See Sound of Music Co. v. Minn. Min. & Mfg. Co., 477 F.3d 910, 916–17 (7th Cir. 2007); Stroud v. Stroud, 641 S.E.2d 142, 146 (Va.App. 2007).

73See United Rentals, Inc., v. RAM Holdings, Inc., 937 A.2d 810, 830–46(Del.Ch. 2007); Reardon v. Kelly Services, Inc., 210 Fed. Appx. 456, 462–62 (6th Cir. 2006).

A number of specific interpretive guidelines concerning the course of negotiations reflect a focus on subjective intentions. Thus, an interpreter should give separately negotiated or added terms more weight than standardized terms.74 Handwritten terms prevail over typewritten or printed terms, while typewritten terms prevail over printed terms.75

A striking example using a course of negotiations is Paul W. Abbott, Inc. v. Axel Newman Heating and Plumbing Co., Inc.76 A plumbing contractor and a plumbing insulation subcontractor sued a city for work done in insulating domestic water piping below finished ceilings in the city’s fire stations. The contract said: “All domestic water piping and rainwater piping installed above finished ceilings under this specification shall be insulated.”77 This sentence was ambiguous because the phrase “installed above finished ceilings” might modify both “domestic water piping” and “rainwater piping,” or instead only “rainwater piping.” A dispute arose over this ambiguity. Prior to submitting its bid, however, the office of the city architect advised the contractor that the intent of the specification was that the contractor would insulate all domestic water piping, and also rainwater piping installed above finished ceilings. Without further ado, the contractor submitted its bid. The court held that the contractor was obligated to perform the work in conformity with this mutual understanding.78 The subcontractor, however, was not so obligated because it was not a party to the conversation.79 Consequently, the specification had one meaning as between the city and the contractor and a different meaning as between the contractor and the subcontractor.80

We should note three qualifications: (1) the negotiating history does not include information available to only one party, unless the information is relevant to prove that a party did or did not know of a trade usage or custom;81 (2) that two provisions were added at different times, reflecting negotiations, might not be relevant;82 and (3) the Restatement (Second) provides that written, integrated standardized agreements generally are

74RESTATEMENT (SECOND) OF CONTRACTS § 203(d) (1981).

75Bristol-Myers-Squibb Co. v. Ikon Office Solutions, Inc., 295 F.3d 680, 685 (7th Cir. 2002).

76166 N.W.2d 323 (Minn. 1969).

77Id. at 324.

78Id. at 324–25.

79Id. at 325.

80Id.

81Gaydos v. White Motor Corp., 220 N.W.2d 697, 701 (Mich.App. 1974).

82Kinek, 22 F.3d at 509.