11 George Mason School of Law Contracts II Interpretation F.H. Buckley [email protected].
Dec 27, 2015
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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?
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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?
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Problems of Interpretation aren’t new
“Hoc est corpus meum"
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Literary and Judicial Interpretation
Objectivism (Textualism)
Subjective Contextualism
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Objective Textualism
Literary Criticism
Statutory Construction
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Literary Interpretation
Objective Textualism: 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”
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Objective Textualism and Statutory Interpretation
Justice Scalia’s Originalism An “original meaning” theory “It is the law that governs, not the intent
of the lawgiver.”
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Now, Subjective Contextualism
Literary Theory
Statutory Construction
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Subjective ContextualismLiterary Interpretation
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
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Subjective ContextualismLiterary Interpretation
Legislative Interpretation Original Intent theory
The meaning of a written constitution is what was meant by those who drafted and ratified it.
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Contract Interpretation
“125 bales of Surat cotton, ex Peerless from
Bombay”: Raffles v. Wickelhaus
The Peerless
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Contract Interpretation:Some problems are impacted
“125 bales of Surat cotton, ex Peerless from
Bombay”: Raffles v. Wickelhaus Neither textual nor contextual theories could resolve
the ambiguity
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Contract Interpretation: In re Soper
In other cases, textualism and contextualism point in opposite directions
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In re Soper: “to my wife”
On objective or plain meaning standards, who is the wife?
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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?
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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”
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In re Soper
How might Soper have cured the problem?
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In re Soper
How might Soper have cured the problem? “to my wife, Gertrude Whitby Young”
So why didn’t he?
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In re Soper
How might Soper have cured the problem? “To my wife, Gertrude Whitby Young” So why didn’t he?
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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
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In re Soper
How might Soper have cured the problem? Olson and Olsen…how do you tell them
apart?
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In re Soper
How might Soper have cured the problem? Olson and Olsen…how do you tell them
apart? Mary Kate is the anorexic one…
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Pacific Gas
What did the indemnity clause state? What does “A indemnifies B” mean?
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Pacific Gas
What did the indemnity clause state? What does “A indemnifies B” mean?
A compensates B for claims asserted by C against B
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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
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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”?
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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?
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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? And on what theory of interpretation?
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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? Is “indemnify” ambiguous? See note 42
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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?
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Pacific Gas
Traynor as a subjectivist Primitive faith Magic words Totemistic words
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Pacific Gas
Traynor as a subjectivist Meaning is necessarily contingent on
“verbal context and surrounding circumstances and purposes in view of the linguistic education and experience of their uses and their hearers or readers (not excluding judges”
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Pacific Gas
Traynor as a subjectivist Meaning is necessarily contingent on
“verbal context and surrounding circumstances and purposes in view of the linguistic education and experience of their uses and their hearers or readers (not excluding judges”
Do you agree?
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Pacific Gas
Traynor as a subjectivist Meaning is necessarily contingent on
“verbal context and surrounding circumstances and purposes in view of the linguistic education and experience of their uses and their hearers or readers (not excluding judges”
Do you see any point to a dictionary?
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Pacific Gas
Traynor as a subjectivist Meaning is necessarily contingent on
“verbal context and surrounding circumstances and purposes in view of the linguistic education and experience of their uses and their hearers or readers (not excluding judges”
Can one draft one’s way around this?
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Pacific Gas
Traynor as a subjectivist Meaning is necessarily contingent on
“verbal context and surrounding circumstances and purposes in view of the linguistic education and experience of their uses and their hearers or readers (not excluding judges”
What does “rational interpretation” (p. 587) require?
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Alex Kozinski and New Textualism
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Kozinski and New TextualismThe Trident Center, West LA
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Kozinski and New TextualismThe Trident Center
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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.
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Yeah, right!
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Trident Center
“Maker shall not have the right to prepay for the first 12 years.”
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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, when interest rates have fallen?
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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.
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Trident Center
In the event of prepayment resulting from a default the prepayment fee will be 10 percent. Did Trident have the right to trigger this?
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Trident Center
In the event of prepayment resulting from a default the prepayment fee will be 10 percent. Did Trident have the right to trigger this? Why might Connecticut General not wish
to exercise this option?
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Trident Center
In the event of prepayment resulting from a default the prepayment fee will be 10 percent. Did Trident have the right to trigger this? Why might Connecticut General not wish
to exercise this option? And why might Trident not want to
default?
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New Textualism
Does the Restatement help? Good faith § 205
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New Textualism
Does the Restatement help? Good faith § 205
Interest rates were on everyone’s mind
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New Textualism
Does the Restatement help? Good faith § 205
Was this between sophisticated parties?
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New Textualism
Mitchell Silberberg & Knupp web siteCORE 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.
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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
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New Textualism
This was between sophisticated parties Were they really much less so in Pacific Gas?
Hunt Foods?
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New Textualism
What do you think of Kozinski’s critique of contextualism? And how does he decide the case?
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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.
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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?
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Rules vs. Standards
Textualism often (but not invariably) implies adherence to bright-line rules
Contextualism often (but not invariably) relaxes rules into less precise standards
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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 § 46.2-870
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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 § 46.2-852.
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Rules vs. Standards
Rules are precise—and so they may be underinclusive:
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Reckless driving at 45 mph
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New Textualism: Rules vs. Standards
Or overinclusive…
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Richard Petty driving prudently at 150 mph
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So why do we employ rules?
They’re a lot cheaper for courts
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So why do we employ rules?
They’re a lot cheaper for courts
They offer a safe harbor For drivers
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So why do we employ rules?
They’re a lot cheaper for courts
They offer a safe harbor For drivers For business parties
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New Textualism: Rules vs. Standards
Rules v. Standards in Contract Law The Willistonian paradigm of rules Corbin and Llewellyn on standards
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New Textualism: Rules vs. Standards
Standards in the UCC: UCC § 2-302. Unconscionability UCC § 1-203. Every contract or duty within
this Act imposes an obligation of good faith in its performance or enforcement.
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Karl Llewellyn’s Situation Sense
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1893-1962
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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
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Eric Posner’s soft vs. hard PER
The transaction costs of inclusion? Qu. consumer contracts
What about policing salesmen?
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Eric Posner’s soft vs. hard PER
The transaction costs of inclusion? Pacific Gas? Trident Center?
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Eric Posner soft vs hard PER
The transaction cost of inclusion?
The possibility of judicial error? Idiosyncratic bargains?
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Eric Posner soft vs hard PER
The transaction cost of inclusion?
The possibility of judicial error? Detailed written contract? Merger clause?
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What if there is a context to the bargain?
Course of performance: a relational contract which has been ongoing
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What if there is a context to the bargain?
What if there is a context to the bargain? Course of performance Course of dealing: Prior repeated
contracts
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What if there is a context to the bargain?
What if there is a context to the bargain? Course of performance Course of dealing Trade usage: parties similarly situated
have a trade custom
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What if there is a context to the bargain?
Restatement § 203(b)Express terms > course of performance,
course of dealing, trade usageCourse of performance > course of
dealing, trade usage Course of dealing > trade usage
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What if there is a context to the bargain?
Frigalment p. 598 What was the trade usage? What were the express terms?
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The UCC: Columbia Nitrogen
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The UCC: Columbia Nitrogen
Buyer agrees to purchase and seller agrees to furnish quantities …
on the following terms…
Products Supplied Under ContractMinimum Tonnage per year…
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The UCC: Columbia Nitrogen
Who took the risk of price fluctuations?
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The UCC: Columbia Nitrogen
Who took the risk of price fluctuations?Both of them
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The UCC: Columbia Nitrogen
What was the course of dealing where Royster was the buyer?
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The UCC: Columbia Nitrogen
What was the trade usage?
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The UCC: Columbia Nitrogen
Qu. the escalation clauseDid it cover commodity price changes?
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The UCC: Columbia Nitrogen
What about the merger clause? Was it poorly drafted?
Cf merger clause on 614
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The UCC: Columbia Nitrogen
Do you agree with Vic Goldberg?
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UCC § 2-202
Do several waivers of contractual rights amount to a course of dealing?
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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?
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Southern Concrete
How to distinguish from Columbia Nitrogen?
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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
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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?
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Southern Concrete
How to distinguish from Columbia Nitrogen? The equities…? No escalation clause?
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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?
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Southern Concrete
Evenfield on enforcement What’s left of the contract, otherwise?
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Is one expected to know trade customs?
Frigalment p. 598: what was the trade usage? What were the express terms?
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Is one expected to know trade customs?
Sunshine Biscuit at p. 615
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Is one expected to know trade customs?
Sunshine Biscuit at p. 615 Does it matter that this was a forward
contract, 8-9 months before harvest?
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Is one expected to know trade customs?
Sunshine Biscuit at p. 615 Does it matter that this was a forward
contract, 8-9 months before harvest? Does it matter that it was the purchaser
who breached, that it did so because potato demand was down, and that it took only 60,000 sacks?
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Is one expected to know trade customs?
Sunshine Biscuit at p. 615 Thomas letter of August 31, 1970: "Just a note to let you
know that we are going ahead with our contract to furnish you 100,000 sacks of Kennebec potatoes between May 17 and July 17, 1971, as per your letter of August 10. We have purchased some very fine seed from Utah and have picked our best land in Kern County for we want to be sure to effect the best delivery possible."
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