BOOK IV PERFORMANCE OF CONTRACTS CHAPTER XXI GENERAL RULES FOR THE INTERPRETATION OR CONSTRUCTION OF CONTRACTS AND THE PAROL Different standards of interpretation must be applied to different classes of contracts.... 604 Standard of interpretation for informal agreements.. 605 Formal and written contracts may exist though parties attach different mean ings to the language... 606 Standard of interpretation where a writing has been adopted. 607 The local standard is preferable to the normal standard. 608 Clear and unambiguous words.... 609 Intent of the parties where the contract is written is ineffective unless expressed in the writing. . . . 610 An exclusively mutual standard is not applicable. 611 Codes and abbreviations... 612 Meaning peculiar to the parties may be given to words if the words appro priately express that meaning. . . . 613 Technical meaning is sometimes given to language in violation of apparent Secondary rules: The main purpose of the instrument will be given effect... 619 Secondary rules: The instrument will be construed if possible so that it shall be effective and reasonable.... 620 Secondary rules: Language will be construed most strongly against the 621 party using it.. Secondary rules: Written matter in a contract is given greater effect than printed matter. 622 Secondary rules: An interpretation given by the parties themselves will be favored..... 623 Secondary rules: Guaranties.. Secondary rules: Conflict between prior and subsequent clauses. Secondary rules: Contracts affecting a public interest. 624 625 626 Latent and patent ambiguities.... 627 Interpretation of several connected writings. 628 Surrounding circumstances may always be shown. Previous negotiations. Parol evidence rule.. Scope of the rule. . . Integration depends upon intent. It may be shown that the writing has never become effective. 629 630 631 632 633 634 Absolute written transfer may be proved by parol to be a mortgage. 635 636 There may be entirely distinct contemporaneous oral and written agreements.. 637 Test for determining whether an oral agreement is so far separate and collateral as to be admissible. . . . 638 Collateral parol agreements contradicting a written contract are inadmissible 639 Collateral agreements contradicting an implication of law... 640 646 647 The parol evidence rule does not exclude oral agreements alone.. § 601. Necessity for interpretation of contracts. The only question of interpretation with which this treatise is concerned relates to contracts. Interpretation of wills or of statutes may involve different principles.1 The interpretation of a contract is the process of determining from the expressions of the parties what external acts must happen or be performed in order to conform to what the law considers their will. Generally, the question of interpretation does not arise broadly but concerns only a particular act or forbearance of one or both of the parties which has been made 1 So the question of the meaning of an entry made in the usual course of business which a witness seeks to use may involve a different principle, since it is wholly a unilateral act. In Norman Printers' Supply Co. v. Ford, 77 Conn. 461, 59 Atl. 499. the words "on contract" appeared in a book of original entries offered by the plaintiff in support of its claim. The court allowed testimony that these words had "a well defined meaning in the plaintiff's business" and always denoted "a conditional lease or sale." It was as proper, the court said, "as if a private cipher had been used, it would have been to explain that." It will be observed that the witness could have given oral testmiony that a conditional lease or sale was involved; and if he was accustomed to make a cross or write the words "on contract" whenever he made such a sale, he could presumably show that also. the subject of litigation or dispute. Acts as well as words may be used in the formation of contracts, and acts as well as words must be interpreted. A wave of the hand, as well as a sentence may be ambiguous. Only on the supposition that every act or word in the formation of a contract can have but one possible sense can interpretation lose its importance. Even on this supposition interpretation still is a logical necessity, but would be involved in learning the language. Blackacre, whether the word is spoken or written, is not the same thing as a certain piece of ground which goes by that name, even though no other land is so called; and the law must decide in any litigation on a contract referring by name to Blackacre that the word is applicable to some particular piece of land.2 Interpretation does not include the discovery of all the effects which the words or symbols used by the parties may have upon the external world. The law may attach consequences to these words or symbols for other reasons than because the parties appear to wish those consequences. A mortgage may provide in terms that the mortgaged property shall be forfeited if the debt is not paid on the law day. This provision will not be enforced. The mortgagor will be allowed a right of redemption, but it is a vicious terminology which would classify this legal effect of the mortgage upon the mortgaged property as within the scope of interpretation or construction. § 602. Construction and interpretation. A distinction has been taken between the interpretation of contracts and their construction.3 Interpretation is thus defined: "Interpretation is the art of finding out the true sense of any form of words; that is, the sense which their author intended to convey, and of enabling others to derive from them 2 "We are turning signs and symbols into their equivalent realities. This must always be done to some extent, no matter how many are the identifying tokens. 'In every case, the words used must be translated into things and facts by parol evidence.' Holmes, J., in Doherty v. Hill, 144 Mass. 468, 11 N. E. 583; Mead v. Parker, 115 Mass. 413, 15 Am. Rep. 2a Seton v. Slade, 7 Ves. 264, 273. 3 Lieber, Hermeneutics (Hammond's ed.), 11, 44. See also 2 Elliott, Contracts, § 1505. Con the same idea which the author intended to convey." struction is thus defined: "Construction is the drawing of conclusions respecting subjects, that lie beyond the direct expression of the text, from elements known from and given in the text conclusions which are in the spirit, though not within the letter of the text.' 4 The distinction thus taken seems of no legal consequence so far at least as the law of contracts is concerned. The sense which the author of words intended to convey by any form of words as distinguished from the "conclusions which are in the spirit though not within the letter of the text" is of no legal importance. The only inquiry which is generally pertinent is the meaning of the language used when judged by the standard adopted by the law. If this standard permits enforcement of "conclusions which are in the spirit though not within the letter of the text," such conclusions have the same importance as conclusions which are in the letter of the text. If the standard does not permit enforcement of conclusions which are not expressed in words, such conclusions are of no legal significance whatever. It seems, however, that a valid distinction though not one of great importance exists between interpretation and construction when those words are given a slightly different definition from that just suggested. Interpretation is properly the process of applying the ordinary legal standard to the words or symbols used in order to determine their meaning or sense, and rules of interpretation are adopted for this purpose. When it is said that words are given their ordinary meaning, or that technical terms are given their technical meaning, the reason for such rules is because it is a natural supposition that persons addressed may be expected to understand ordinary language or technical terms in the way stated in the rules, and therefore that the meaning or sense of the words will thus be ascertained. Even 4 Professor Thayer says: "It appears that neither common usage nor practical convenience in legal discussions supports the distinction taken by Dr. Lieber in his 'Legal and Political Her meneutics' (c. 1, § 8, c. 3, § 2), between interpretation and construction. I shall not discriminate them." Preliminary Treatise on Evidence, 411. when the rule under discussion is that language will be construed most strongly against the party using it, it may be maintained that this also is a rule of interpretation, since it should be anticipated that the person addressed will understand ambiguous language in the sense most favorable to himself, and that his reasonable understanding should furnish the standard. But when it is said that contracts which affect the public are to be construed most favorably to the public interest, it is obvious that the court is no longer applying a standard of interpretation, that is it is not seeking the intention of the parties. It is attaching a meaning to the contract for another reason than the primary one which is ordinarily controlling. This is true too, when it is said that guarantees are construed in favor of the guarantor. A rule of this latter sort may be called a rule of construction rather than of interpretation. Such a rule of construction can come into play only when the primary standard of interpretation leaves the meaning of the contract ambiguous; for if the application of the ordinary standard of interpretation establishes a clear meaning for the words or symbols, a rule of law which forbids effect being given to that meaning is a part of that substantive law of contracts which comes into play after interpretation and construction have finished their work. A rule of construction as thus understood then is one which in case of ambiguity gives a special meaning to language for reasons other than the normal meaning of the words or the actual or apparent intention of the parties; but such a rule of construction, like a rule of interpretation, concerns itself with the legal meaning of the contract, not with its legal effect after that meaning has been discovered. § 603. Possible standards of interpretation. In order to determine the legal meaning of a contract a "standard of interpretation," to use Wigmore's helpful phrase, must first be established-that is the code by which the meaning of the language and acts of the parties is to be defined. It is useless to talk of the "meaning" of a contract unless it is known whose meaning is sought; and this inquiry, as will be 'See infra, § 626. See infra, § 625. |