assent to a particular form of words as the definite and conclusive statement of their agreement), but also any informal contracts of which there may perhaps be written memoranda, where the mutual assent of the parties is simply to the transaction proposed and not also to the writing as a full and final statement of the agreement.

§ 605. Standard of interpretation for informal agreements. In contracts of the second class, the standard of interpretation which the modern law tends to accept, and which is supported by sound principle, is that suggested at the end of $603; namely, the sense in which the party who used the words in question should reasonably have apprehended that the other party would understand them. When A offers his promise for B's and B accepts, A will be bound not only by any meaning which A knows, but also any meaning which A ought to know that B will attach to A's words; and, on the other hand, B's assent though consisting merely of the word "yes," or "I will accept," will bind B to the meaning of the words in which he reasonably should have supposed A used them. It may be

'In Paley's Moral Philosophy, Book III, Part I, Chap. 5, the author deals with this matter from a moral standpoint, and says: "Where the terms of promise admit of more senses than one, the promise is to be performed in that sense in which the promisor apprehended at the time that the promisee received it." But as Pollock points out (Wald's Pollock, 3d ed. 309), this does not exactly hit the mark and Archbishop Whately thus corrected the defect:-"Paley is nearly but not entirely right in the rule he has here laid down. . . . Every assertion, or promise, or declaration of whatever kind, is to be interpreted on the principle that the right meaning of any expression is that which may be fairly presumed to be understood by it." Subject to the qualification hereafter (607,) referred to with reference to written contracts, this seems accurate. In Thoubboron v. Lewis, 43 Mich. 635,

638, the court said: "The negotiations being by letter and between business men, and not being conducted in the phraseology of lawyers, or with the care about expression generally obsefved in formal documents, it is not safe and would not be fair to test it by any technical rules. It is a case for equitable interpretation, and the proper course is to look at all the circumstances, and then read the arrangement as the defendants were bound to consider it as understood by the plaintiff." In Clark v. Lillie, 39 Vt. 405, 411, the court said: "The question really reduces itself to this, whether the defendant's liability to the plaintiff is to be governed by what was said between them, or by an arrangement between Sadler and the defendant of which they both neglected to inform the plaintiff and for which neglect the plaintiff was not responsible. The defendant may have supposed that Sadler informed

supposed that A used the words in a sense different from that in which B understood them, but that A had no reason to suppose that his understanding would not also be B's, and B on his part had no reason to suppose that his understanding would not also be A's. In such a case no contract has been made; 10 though if the parties had made a formal contract or agreed upon some memorial, usually a writing, as an integration of their contract, there would have been. The limitation which the law puts, as will hereafter be seen, on the power of the parties to attach any meaning which they choose to words or symbols in a written contract, seems inapplicable to contracts of the class here considered. In such informal contracts any code of signals which the parties may devise seems permissible. Not only may A and B agree that holding up a hand means an agreement to buy or to sell a hundred shares of a particular stock, but it seems that they may agree that in the code which they are using, though it is a code peculiar to themselves, horse shall mean cow, or that buy shall mean sell. To be sure, clear proof will be needed in order to convince a tribunal that such was the agreement of the parties, but there is here what Lord Justice Bowen has called "not so much a canon of construction as a counsel of caution." 11

§ 606. Formal and written contracts may exist though parties attach different meanings to the language.

Where A and B reduce their agreement to writing, even though not such a writing as to create a formal contract,

the plaintiff of this arrangement, but the plaintiff was not at fault for his so thinking. On the contrary the plaintiff informed the defendant of the contract with Sadler, and no such qualification being mentioned in the plaintiff's letter the defendant had reason to understand that it had not been made a part of the contract. The law will presume that the defendant meant what his language by its terms and under the circumstances in which it was used would fairly be understood to mean, and this presumption is a

matter of law and not to be rebutted by proof that he intended something more or different which he made no attempt to express and which the plaintiff neither understood nor had reason to understand." See also Hatch v. Douglas, 48 Conn. 116, 40 Am. Rep. 154; Southern Realty Co. v. Hannon, 89 Neb. 802, 132 N. W. 533; Ballard v. Burton, 64 Vt. 387, 24 Atl. 769, 15 L. R. A. 664.

10 See supra, §§ 94, 95, and infra, § 661.

11 Re Jodrell, 44 Ch. D. 590, 614.

(i. e., a specialty) if it is adopted by the parties as a memorial of their agreement, the standard of interpretation changes. When A makes a covenant under seal to B in consideration of a covenant by B to him, it makes no difference so far as the formation of a contract is concerned how different may have been the sense which A or B attached to the words of the covenant, or how reasonable may have been the belief of each. Their assent to the execution of that instrument is the only assent necessary to bind them. It is true that if they acted under such misapprehension, as courts of equity regard as sufficient basis for relief, the contract may be avoided; but, it is important to observe a distinction between a contract voidable on equitable grounds and no contract at all. The same is true of a negotiable instrument. 12 Even in case of a writing wholly informal in character, but which nevertheless was adopted by the parties as a statement of their bargain, the same principle is applicable. The parties have assented to those words as binding upon them. In an ordinary oral contract or one made by correspondence, the minds of the parties are not primarily addressed to the symbols which they are using; they are considering the things for which the symbols stand. Where, however, they incorporate their agreement into a writing they have attempted more than to assent by means of symbols to certain things, they have assented to the writing as the adequate expression of the things to which they agree. Therefore a contract may be created though each party attached a different meaning to the language used, if he had no reason to suppose that his own meaning was not shared by the other party. 13

12 The theoretically possible case of an oral promise where it is agreed that the particular spoken words, whatever their legal meaning may be, shall fix the rights of the party is so unusual that it is here disregarded.

1 In Sawyer v. Hovey, 3 Allen, 331, 333, 81 Am. Dec. 659, the court said: "If parties understand an agreement differently, and neither of them makes known to the other his construction of it, and it is afterwards reduced to

writing and duly executed, they are bound, in equity, as well as at law, by the terms of the written instrument, which in such cases is to be construed by the court." See also Bentley v. Mackay, 4 De J. F. & J. 279, 285; Arnold v. Arnold, 14 Ch. D. 270, 274; Deutsch v. Pratt, 149 Mass. 415, 420, 21 N. E. 1072; Woburn Nat. Bank v. Woods, 77 N. H. 172, 89 Atl. 491; Phillip v. Gallant, 62 N. Y. 256; Rickerson v. Insurance Co., 149 N. Y. 307,

It should be observed that a written contract may fail to be enforceable for other reasons than for lack of consideration or mutual assent-notably because the promise can have no application to existing facts. This situation arises frequently under insurance policies. Where the insurer warrants the present existence of a situation of fact, which in truth does not exist, the risk never attaches and the policy never becomes an obligation. This, however, is not because the parties had failed to come to an agreement but because they have agreed that under the facts which exist there shall be no liability. Thus when an insurance policy describes the insured property as a dwelling house, when in fact the lower storey of the building is occupied as a shop, the risk never attaches. 14 The difficulty with the plaintiff's case here is not lack of mutual assent. The parties have agreed to the terms of the policy as an integration of their agreement; not is there any difficulty in identifying a particular building as that to which the writing relates. If the bargain were a written contract to buy and sell, providing that the goods should be delivered at the buyer's “dwelling house" there would be no difficulty in enforcing the contract because the lower storey of the buyer's dwelling house was used as a shop. In the insurance cases, however, the extent of the risk depends upon the nature of the property insured; and "dwelling house" acquires a narrower meaning on this account. It is not enough for the insured to give a description which will enable the court to determine the subject-matter which is to be insured; the insurer must be apprised of the character of the property. The terms of the bargain are fixed on the assumption that he is so apprised. The insured, therefore, warrants that his description is accurate sufficiently to indicate the character of the risk. A breach of this warranty avoids liability on the insurer's promise and if, as in the case

43 N. E. 856; Johnston v. Patterson, 114 Pa. 398, 6 Atl. 746; Clark v. Lillie, 39 Vt. 405, and cases in the following section.

14 Bowditch v. Norwich Union Fire Ins. Co., 193 Mass. 565, 79 N. E. 788; Dougherty v. Greenwich Ins. Co., 64 N. J. L. 716, 42 Atl. 485, 46 Atl. 1099.

So in Thomas v. Commercial Union Assur. Co., 162 Mass. 29, 37 N. E. 672, 44 Am. St. Rep. 323, a building properly described as a hotel was held not covered by insurance which described it as a dwelling house. See also Harris v. St. Paul F. & M. Ins. Co., 126 N. Y. S. 118.

supposed, the warranty is broken at the time when the agreement is made, no risk ever attaches. If the error of description involved no increase of risk on the part of the insurer, the result would be different. A misdescription in some particular would not preclude recovery.15

§ 607. Standard of interpretation where a writing has been adopted.

According to the weight of authority and on principle, where the parties have assented to a writing as an expression of their agreement, or where a writing is required by law, the standard of interpretation is the local standard; that is, the natural meaning of the writing to parties of the kind who contracted at the time and place where the contract was made, and with such circumstances as surrounded its making. The question is obscured by the somewhat inexact expressions often found in cases whose decision did not require a careful discrimination between an individual standard, a local standard, and a normal standard; because whichever standard was adopted, the result in the particular case would be the same. Moreover there is much to show that in the early law, the normal standard of language was that adopted. In any endeavor to show that the local standard is that now applicable, its validity must be defended on the one hand against the normal standard, and on the other hand against such an individual standard as is permissible in informal contacts. This will be done in the following sections. It may be noted that the results reached by applying the local standard are the same as would be reached by applying the standard applicable where no memorial is made of the agreement, or apparent agreement, except in two cases

(1) Where there is such a justifiable difference of belief concerning the sense in which the parties used the words as would prevent the existence of a contract had the negotiations been informal.

(2) Where the sense which the promisor reasonably supposed the other party would attach to his words is one which neither normal usage, nor local or technical usage justifies.

The first of these exceptions results from the considerations

15 Locke v. Royal Ins. Co., 220 Mass. 202, 107 N. E. 911.