These alternatives reflect the objective theory in two versions and the subjective theory. Objectivism either confines the inquiry to the four corners of the contract document, viewed as a whole, or expands the inquiry to include the document’s evident purpose(s) and the objective circumstances. Subjectivism is concerned that the parties’ subjective intentions can be realized only by including, in addition, evidence of the course of negotiations, the parties’ prior dealings, a party’s statement of its own intent, and any other relevant evidence. We will consider the key question of how much context is needed, normatively, in Chapter 6.

§ 4.2.3. Judge and Jury

Under the four corners rule, the role of the judge is straightforward. She decides whether a contract is ambiguous from the face of the document.58 If the document does not appear to be ambiguous, the analysis ends; the plain meaning rule comes into play to require that the judge give the unambiguous meaning to the contract as a matter of law. No extrinsic evidence then is admissible for the purpose of giving meaning to the writing. If the contract is ambiguous on its face, extrinsic evidence is admissible for that purpose. The courts generally give the question of meaning to the jury, when it is the fact-finder and when answering the question depends on disputed extrinsic evidence.59 When there is no such dispute, the judge decides.60 A little authority gives a question of meaning to the judge also when “the form or subject-matter of a particular contract outruns a jury’s competence.”61

Matters are more complicated when a court must determine whether there is an ambiguity after admitting extrinsic evidence. According to Pacific Gas & Electric Co., as indicated above,62 the trial court would admit the extrinsic evidence conditionally, reserving its ruling on admissibility or admitting it subject to a motion to strike. If the court then finds the contract to be ambiguous, the evidence stays in. If the court finds the contract to be unambiguous, it rules the evidence out or grants a motion to strike and, in either event, gives the contract its unambiguous meaning

58Winegar v. Smith Inv. Co., 590 P.2d 348, 350 (Utah 1979).

59Hartford Acc. & Indem. Co. v. Wesolowski, 305 N.E.2d 907, 910 (N.Y. 1973). See § 5.1.

60Id.

61E.g., Meyers v. The Selznick Co., 373 F.2d 218, 222 (2d Cir. 1966).

62See § 4.2.2.

as a matter of law.63 It may appear that the jury or judge-as-fact-finder hears the evidence in any event. If the court finds that there is no ambiguity, it may not be humanly feasible for the fact-finder to disregard it. When there is or will be a jury, however, the court can protect it from contamination by holding an evidentiary hearing outside of its presence. If the court finds the contract to be ambiguous, the parties can replay the evidence before the jury. Such a two-step procedure is somewhat unusual and can be awkward.64

A more streamlined procedure is possible. There is no need to admit any evidence to meet Justice Traynor’s concern that, without considering a contract’s context, a judge may blindly follow misleading apparent meanings and miss extrinsic ambiguities. His concern, like Corbin’s, centered on the way a judge who did not know of the parties’ context would be interpreting in the context only of her own linguistic background and experience. Because the judge’s personal context will not match the parties’, this can lead her to find an unambiguous meaning at odds with the parties’ subjective intentions.65 In Traynor’s view, that would be an unjustified imposition on the parties.66 However, a judge can base the ambiguity decision on submissions, including allegations, contentions, affidavits, offers of proof, and arguments by counsel, on a motion for summary judgment or upon objection before admitting the evidence at trial.67 These submissions can provide a context for the ambiguity decision— even a rich context—that is not the judge’s own, but that would acquaint her with that of the parties. She then can see (as well as one ever can) the contract language from their point of view. No findings of fact need be made—only the usual assumptions on such motions. In the first instance, the court needs to determine only whether the contract is ambiguous. It can leave proof of the document’s meaning to a later stage if one is appropriate.

Note that there is an important convergence between the substantive law of contracts and the law of civil procedure. If a court finds a contract to be unambiguous in the contested respect, there can be no material

63Pacific Gas & Elec. Co., 442 P.2d at 645 n.7.

64Alyeska Pipeline Service, 645 P.2d at 770.

65Pacific Gas & Elec. Co., 442 P.2d at 643.

66Id. at 645.

67See Dore, 139 P.3d at 60-61; Local Union No. 1992, Int’l Brotherhood of Electrical Workers v. Okonite Co., 189 F.3d 339, 343 (3d Cir. 1999); Mellon Bank, 619 F.2d at 1011.

dispute of fact as to its meaning. A judge should decide the question of meaning on a motion for summary judgment. Similarly, if a contract is unambiguous, no reasonable jury could come to any conclusion but one. A judge should decide on a motion for a directed verdict or judgment notwithstanding the verdict. Consequently, it seems, the law of civil procedure would require a court to decide (upon motion) whether a contract is ambiguous, even if the substantive law of contracts did not.

§ 4.2.4. The Parol Evidence Rule Distinguished

Some courts say that, when a contract is unambiguous and integrated, the parol evidence rule precludes the admission of extrinsic evidence offered to give meaning to a contract’s terms:

The parol evidence rule “prohibits the admission of extrinsic evidence of prior or contemporaneous oral agreements, or prior written agreements, to explain the meaning of a contract when the parties have reduced their agreement to an unambiguous integrated writing.”68

This statement of the law confuses the parol evidence and plain meaning rules in three respects. First, it says that the parol evidence rule applies when a contract is both unambiguous and integrated. This confuses the predicates of two separate legal rules. The parol evidence rule applies when an agreement is integrated, whether or not it is unambiguous. The plain meaning rule, by contrast, applies when an agreement is unambiguous. An agreement can be partially or completely integrated even though one or more of its disputed terms is ambiguous, or not completely integrated even though a term is unambiguous. Second, the statement confuses the legal consequences of the two rules. The parol evidence rule discharges prior and contemporaneous parol agreements. The plain meaning rule, by contrast, requires a court to give unambiguous contract language its unambiguous meaning. Third, the functions of the two rules are different. The parol evidence rule functions to identify a contract’s terms. The plain meaning rule functions to give meaning to a contract’s terms.

68 Alpha Real Estate Co. of Rochester v. Delta Dental Plan of Minn., 664 N.W.2d 303, 312 (Minn. 2003) ((quoting RICHARD A. LORD, WILLISTON ON CONTRACTS § 33:1 (4th ed.1999)). See P & O Nedlloyd, Ltd. v. Sanderson Farms, Inc., 462 F.3d 1015, 1019 (8th Cir. 2006); Wittig v. Allianz, A.G., 145 P.3d 738, 745 (Haw.App. 2006).

In sum, the predicates for and consequences of the two rules are different, and the rules have different functions. It is not the case that the parol evidence rule is the rule that operates to exclude parol evidence whenever it is excluded. That would turn the rule into a rule of evidence, whereas it is a rule of substantive law.69

To elaborate, the three sequential tasks in contract interpretation reduce the confusion. First, an interpreter must identify the terms to be given meaning. Second, she must decide whether those terms are relevantly ambiguous. Third, she must resolve any ambiguity that appears. The first two decisions are for the judge, while the third may be for the finder of fact. The confusion identified in the preceding paragraph collapses the first and second steps.

It might be thought that the first and second steps should be collapsed.70 Perhaps identifying terms and giving them meaning cannot be distinguished because terms and meanings are the same thing. But this would be a mistake. The distinction between terms and meanings is well established in the law.71 The Restatement (Second), for example, draws the distinction in its definition of interpretation: “Interpretation of a . . .

term . . . is the ascertainment of its meaning.”72

The distinction between terms and meanings should be understood conceptually as follows. Terms designate classes of actions, objects, events, states of affairs, or persons. For example, the word bar designates the class of all bars. It is abstract because it can encompass any number of things that are bars. One can identify a word like bar (or a string of words) as a term without determining which kinds of objects fall within the class it designates. Bar is ambiguous because it encompasses a number of subclasses. Thus, a law student may want to join the bar but may be barred and end up tending bar, behind bars, or selling candy. Deciding that bar is ambiguous, consequently, is a distinct and second step. It involves identifying the subclasses within the class of all bars—a legal organization, a physical constraint, a place to drink alcohol, or something sweet to eat. The subclasses are the word’s possible meanings (its referents). Accordingly, an unambiguous word bears one and only one meaning; it designates

69See § 3.1.1.

70Peter Linzer, The Comfort of Certainty: Plain Meaning and the Parol Evidence Rule, 71

FORDHAM L. REV. 799, 801 (2002).

71See, e.g., Walsh v. Nelson, 622 N.W.2d 499, 503 (Iowa 2001).

72RESTATEMENT (SECOND) OF CONTRACTS § 200 (1981) (emphasis added); see id. at § 212(1).