Ambiguous Contract Terms: Enforceability and Interpretation
Raffles v. Wichelhaus
Brief Fact Summary
Plaintiff contracted to sell cotton arriving on a ship called the Peerless to the defendant. As it happened, there were two ships called the Peerless, and the contract did not specify which ship carried the cotton. Defendant refused to accept the cotton when it arrived, and Plaintiff sued.
Synopsis of Rule of Law
Where a non-material term, such as mode of shipment, is ambiguous, the contract is still enforceable.
Facts
Plaintiff agreed to sell Defendant 125 bales of Surat cotton to arrive via the ship called the Peerless from Bombay. Defendant believed the shipment would arrive on the Peerless that arrived from Bombay in October. However, Plaintiff was unaware of such a ship, as Plaintiff intended that the cotton would arrive via the Peerless from Bombay in December. When the December Peerless arrived with the cotton, Plaintiff was ready and willing to deliver the cotton to Defendant, but Defendant refused to accept the cotton or pay Plaintiff for it.
Issue
Is a contract enforceable where the parties are in disagreement as to the terms dictating shipment and delivery?
Held
Yes. The contract was for the sale of cotton. It was immaterial by what ship the cotton arrived as long as it arrived as contracted, i.e. on a ship called the Peerless. Since the parties did not state an intention at the time of contracting as to which ship should carry the cotton, absent fraud, a written contract, good on its face, shall not be disturbed by parol evidence.
Dissent
Since there were two ships called the Peerless, the contract contains a latent ambiguity. Therefore, parol evidence may be introduced to prove that the parties meant different ships. This being so renders the contract nonbinding.
Discussion
Ambiguous terms that are not material to the agreement will not render the contract void.
Frigaliment Importing Co. v. B.N.S. International Sales Corp.
Brief Fact Summary
Defendant B.N.S. International Sales Corp. contracted to sell chicken to Plaintiff, Frigaliment Importing Co. Defendant sent chicken complying with the weight requirements of the contract. Plaintiff argues that the chicken sent did not comply with the terms of the contract because the term “chicken” means young chicken.
Synopsis of Rule of Law
To interpret a disputed term in a contract, the court will consider (in order of importance): (1) the language of the contract, (2) the preliminary negotiations, (3) trade usage, (4) legal standard, (5) course of performance, and (6) maxims.
Facts
Defendant contracted to sell chicken to Plaintiff. Both contract indicated that Defendant was selling specified amounts of 2 1/2 – 3 lb. chickens and 1 1/2 – 2 lb. chickens. When the fist shipment was sent, Plaintiff found that the heavier chickens were not young chickens suitable for broiling or frying, but older stewing chicken. The parties disagree as to what the term “chicken” in the contract means.
Issue
Does the term “chicken” in the contract mean only younger chicken?
Held
No. The term “chicken” in the contract did not mean only younger chicken.
In determining what a term means the court will consider (in order of importance): (1) the language of the contract, (2) the preliminary negotiations, (3) trade usage, (4) legal standard, (5) course of performance, and (6) maxims.
The smaller chickens had to be younger chickens, because older chickens do not come in that size. Because the smaller chickens had to be younger chickens, Plaintiff argues that the larger chickens also had to be young.
Plaintiff also argues that trade usage of the term “chicken” is to indicate a young chicken. However, there was conflicting evidence as to whether “chicken” only means a young chicken in the trade.
One maxim is that a reasonable construction is preferred over an unreasonable construction. Defendant alleges that to sell younger chicken to Plaintiff at the contract price would result in a loss to the Defendant. Because under the Plaintiff’s construction the contract would result in Defendant selling chicken at a loss, Defendant argues that Plaintiff’s definition of “chicken” is unreasonable.
• The Court holds that the because Defendant’s definition coincides with the objective meaning, one of the dictionary definitions, the Department of Agriculture’s regulations referenced in the contract, some trade usage, the realities of the market, and statements by Plaintiff’s spokesperson, Plaintiff has not met its burden of showing that the narrower definition of the term applies.
Discussion
In the present case, the court holds that Plaintiff did not meet its burden of showing that its interpretation of the term “chicken” should control when all of the factors are considered.