Ruminations doesn’t think it’s going out on a limb by writing that we’re all guilty of succumbing to “Confirmation Bias” illness. We’d express that as: “We all interpret things in a way that supports our pre-conceived notions.” Psychologists would express it more artfully.
From time to time, but far less often than one might suppose, an argument will arise over “What does that contract provision mean?” Yes, believe it or not, active minds (and, in our experience, more often, inactive minds) will differ as to what a lease or other agreement provision really says or, more accurately, was meant to say. Even perfectly written text can be read to say something other than what was intended, and that’s what Confirmation Bias is all about. People see only what you want to see, and even the College of Cardinals won’t convince them otherwise.
When disagreements about interpretation arise, and each disputant finally abandons the notion of self-help (“might makes right”), the parties turn to a putative “neutral,” a judge or mediator or arbitrator. Presumably such a person (or panel) has no pre-conceived notion to confirm, though experience has told all of us that this presumption is somewhat Utopian.
This week and next, Ruminations will explore “Contract Rules of Construction (Interpretation).” Such rules are not a recent invention. Every day, it is our practice to review similar rules that were written down between 1,600 and 1,800 years ago. Regular readers of this continuing series of diatribes (i.e., this blog) can recount many, many instances where Ruminations has pulled out one or two or three “rules” to aid the reader in understanding a court’s holding. Now, we’re going to try to be a little more methodical in dealing with this very important topic.
Disputes require disputants; if there are none, you don’t have a dispute. When you have them, it means that they disagree over what a contract provision means – over what was “intended.” That leads to the fundamental task facing anyone who wants to know what the disputed provision says – “In the context of the entire agreement, what did the signing parties intend.” Underlying that deceptively simple statement is the concept that the signing parties clearly intended that their agreement be treated as a single one, not as a set of marginally related smaller agreements. Basically, rational individuals don’t reach agreements that give with one hand and take away with the other. That style is reserved for unilateral decisions, not mutual agreements.
So, in determining what was “intended” by a given set of words, the conclusion has to strive to give respect to every other set of words in the same or contemporaneous documents. That’s called, “giving effect to all provisions.” Very often, looking as an isolated word or set of words, no matter how sure the reader might be, isn’t going to yield up the answer to what was intended in the first place.
Today, we’re not going to open the wounds we’ve caused in past postings by distinguishing between what is “vague” and what is “ambiguous.” Interested readers can research that topic themselves. For this pair of blog postings, we’ll be dealing with “ambiguous,” a words or set of words capable of having two or more meanings, the collective possibilities being known to all.
That concept is important because if the “neutral” finds the disputed language to be unambiguous, i.e., to have only one meaning, that’s the basis that’s going to be used to determine the signing parties’ intent. Note the nuance there. Just deciding that the language only has one possible meaning doesn’t end the matter. What ends the matter is using that “single” meaning, in the context of the underlying dispute, to decide what the signing parties intended be the outcome.
If, however, the “neutral” decides that there are two or more possible meanings for the language in front of her or him, resort to outside material, external materials is now on the table. First year law students who are now shouting, “What about the ‘parol evidence’ rule to keep all of that stuff out,” haven’t finished the course. When something is determined to be “ambiguous,” the “parol evidence” rule is off the table. For those who are wondering what this “rule” might be, try this: “The parol evidence rule bars use of PRIOR extrinsic materials to modify, explain or change the meaning of the terms of an agreement.” That, however, presumes that the terms of an agreement are “known” because if they aren’t “known” (e.g., they are ambiguous), you wouldn’t be changing anything by looking outside of the document itself (other than to change something from “unknown” to “known).” The ‘parol evidence rule” is related to the “merger” or “complete agreement” clauses in an agreement, none of which deprive the decider of the right or ability to reach outside of the agreement itself to resolve an ambiguity.
So, said yet another way, the goal of contract construction is to figure out what the parties intended in a way that makes the whole agreement work as “one.” Think: “harmony.”
Is an agreement ambiguous just because the parties are now warring and each takes a position contrary to, and incompatible with, the other’s position? No. An agreement’s provision is ambiguous when its words are honestly susceptible to more than one meaning. Just because one party is mistaken about what a word means doesn’t make that word ambiguous. For example, if a whole bunch of dictionaries agree as to what a word means, it isn’t terribly important if one of the signing parties had misused the word since the beginning of time when the other knew what the word meant, intended to use it in that sense, and didn’t have any idea that her or his counterpart was out sick on that school day.
None of that is to say that a dictionary will override the “wrong” meaning of a word when both parties held the same misbelief. If any reader is intrigued by this statement, here’s a snippet from an opinion written by Judge Henry Jacob Friendly in 1960: “Plaintiff says ‘chicken’ means a young chicken, suitable for broiling and frying. Defendant says ‘chicken’ means any bird of that genus that meets contract specifications on weight and quality, including what it calls ‘stewing chicken’ and plaintiff pejoratively terms ‘fowl.’ Dictionaries give both meanings, as well as some others not relevant here.” How that dispute was resolved can be discovered by clicking HERE.
When searching for meaning in an agreement, follow these rubrics: Look at the four corners of the document. Assume that words have their ordinary, customary meanings, not that the parties had their own language. Yes, think “horse,” not “zebras.” Don’t strain to find meaning in the word or words (or in life).
If the agreement provides a usable definition for a word or phrase, that’s the one the parties are presumed to have intended. If the same word or phrase is used in different places, presume the meaning doesn’t change from place to place. That’s a presumption and the burden to overcome the presumption is going to fall on the one who doesn’t like the outcome.
As noted above with approval, and as noted in several earlier blog postings with disapproval, if the agreement doesn’t yield up the “meaning” of a word, resort to the “dictionary” can inform the decider as to what was most likely intended. Unfortunately, unlike for the game of Scrabble, there is no official dictionary. And, it is unlikely that there could be. To the chagrin of those on the “losing” side of a contract construction dispute, dictionaries differ not only in price, size, completeness, and style, but also in the meanings ascribed to some words. In addition, dictionaries list multiple definitions for the same word. If you don’t have an appreciation for the choices a court could make in order to meddle, look up the simple, common word, “to.” Each of these considerations allows a court to apply its own form of “confirmation bias” when looking for the meaning of “life” or for that of any other word. For more about how that works, take a look at one of our earlier postings by clicking: HERE.
Because you are obliged to consider agreements as a whole and to attempt to give compatible meanings to all provisions of an agreement, you’ve got to consider “context.” When words are grouped together, it is likely that they are expected to play well together. Even the individual fruits in a fruit salad, very different one from the other, are all there for a common reason. Sentences grouped in a paragraph or in a single section of a contract are generally intended to relate to each other and not to be cut up, ransom letter-like, and then reorganized to achieve an unbargained-for meaning
Nowhere is this more evident than in lists preceded by some form of, “including, but not limited to.” On its face, the presence of “but not limited to” might seem to be an open-ended invitation to include random items as part of the general class of items being described. For example, in the statement: “Tenant will not sell any foods, including but not limited to, lamb, chicken, beef, buffalo, veal, fish, and turkey,” one focusing on the “not limited to” phrase might think the tenant can’t sell bananas because no one would argue that bananas are not a kind of food. But, that’s not the way contract construction works. There is a Latin-named rule of ejusdem generis and that means “of the same kind.” So, even though our example begins with a pretty broad, general, and easy to understand word, “food,” the list that follows, caveat or not, tells us that the KIND OF FOOD we really mean are those that would fit in the list that follows the general term (i.e., what follows “food”). What the listed foods have in common is that are “animal” meat or flesh. Neither a banana nor a bowl of corn flakes is “food” when it comes to understanding what the tenant isn’t allowed to sell. It doesn’t matter that one can argue that “everyone knows that a banana is food,” because in the context presented, a banana is not the KIND OF FOOD intended to be banned. “Including, but not limited to,” doesn’t mean “anything goes.”
If that’s the case, why include “but not limited to” if it isn’t used to make a list “open ended”? That’s easy; it allows the decider to look for like-kind items to those on the list. If our example had said, “Tenant will not sell any foods, including lamb, chicken, beef, buffalo, veal, fish, and turkey,” a court should not (will not) bar the tenant from selling venison because venison isn’t in the list of banned foods.
We’re pretty optimistic that there will be a “next week.” With that in mind, think of this as an intermission with the final act to follow then. During the intermission, think how what has already been written can be useful. For one, if you know how courts go about ruling on what disputed terms of an agreement were meant to say, you’ll start writing them so that courts will rule in a way that comports with your intention. Secondly, if you understand how this “system” works, you’ll understand why your personal “absolutely, positively clear understanding” of what those “particular” words “really” mean, might not be what a court rules them to mean. Ruminations believes the first point is more important than the second one, but has encountered the second point far, far too often.