Interpreting Ambiguous Terms

1. An interpretation issue exists if the parties have a factual dispute over whether a term should be included in an agreement. a . True b . False ambiguity

B. FALSE An interpretation issue exists of the parties have a dispute over the meaning of a term. See Templin, Chapter 22, Section B.1, Do the Parties have a dispute over meaning?

1. Buyer and Seller entered into a written agreement in which Buyer agreed to purchase 1,000 salad bowls in an " assortment of shapes " for a specific price. Genarally, Seller make salad bowls in four different shapes — e.g. oval, square, round, and rectangular. However, for

See.

2. Painter and Owner enter into a contract for Painter to paint the interior of Owner's house . Painter knows that by " the interior of the house , " Owner means the walls and the trim . In the trade of interior painting , the " interior " means the walls only . Owner has no experience with painting and does not know that Painter plans to paint only his walls . Painter proceeds to paint only the walls inside Owner's house . If Owner sues Painter for breach of contract , how would the court interpret the phrase " the interior of the house " in the contract ? a . Based on the trade usage of the word " interior " in the painting trade , Painter's meaning would prevail . b . Painter's meaning would prevail because "the interior of the house" is not a certian term and Owner, the person seeking the painting, should have claried this with Painter. c . Owner's Owner meaning would prevail because know of Painter's meaning, but Painter knew of Owner's meaning. d . Owner's meaning would previal because the courts would find unequal bargaining power between Owner and Painter and would attempt to balance the power in this manner.

See.

tract whereby one year . The pounds of bananas 3. Buyer and Seller entered into a con Seller would deliver 1,000 for $ 500 every week for written contract , which has a merger clause , provided be scheduled hours . " In the banana on Fridays that deliveries would during business trade , " business hours " is understood to mean between " 7 a.m. and regularly accepted 3 p.m. " However , for the first 23 weeks Buyer deliveries from Seller until 4 p.m. on Fridays . After 23 weeks , Buyer refused a delivery at 3:30 p.m. and sued Seller for breach of con tract . Assume that the court hearing the case is in a modern jurisdiction and that the court determined that the term " business hours " was ambiguous . Which of the following would a court weigh most heavily in interpreting the meaning of the term " business hours " ? a . The fact that " business hours " means between 7 a.m. and 3 p.m. in the banana trade . b . The ordinary meaning of the term " busi ness hours " is between 9 a.m. to 5 p.m. c . The fact that Buyer accepted deliveries for 23 weeks up until 4 p.m. d . That absent an express provision , an implied term in the sale of perishable goods is that time is of the essence .

See.

6. A course of dealing is established by consistent conduct between the parties a . in relation to previous contracts of a similar nature between the parties . b . based on repeated occasions for performance under the present contract .

a . by consistent conduct between the parties in relation to previous contracts of a similar nature between the parties . The correct answer is (a). Restatement (Second) of Contracts §202(4), provides that parties have established a "course of dealing" when they have engaged in a "sequence of previous conduct between the parties to an agreement which is fairly to be regarded as establishing a common basis of understanding for interpreting their expressions and other conduct." See Templin, Chapter 22, Section C.3.

4. A classic jurisdiction allows interpretative evidence a . for patent ambiguities b . for latent ambiguities . c . for both patent and latent ambiguities d . only if the writing is partially integrated

a . for patent ambiguities The correct answer is (a). The classic jurisdiction only considers the plain meaning of a term to resolve whether a term is ambiguous. To determine plain meaning, courts use dictionaries and common sense. If the term is used in a technical sense (i.e., in an industry where the term has a specialized meaning) then the court adopts the plain meaning of the technical term. If a term does not have more than one ordinary meaning, then the classic jurisdiction does not consider the dispute. You will recall that the classic jurisdiction does not consider a latent ambiguity since that would require introducing outside evidence other than the ordinary meaning of the term. Consequently, answers (b) and (c) are incorrect. Answer (d) is too limited. A classic jurisdiction might allow interpretative evidence a totally integrated document with a merger clause if there was a patent ambiguity.

2. An ambiguity exists if the term is reason ably susceptible to more than one interpretation . a . True b . False

a. True. Neither the classic nor the modern jurisdictions allow evidence of an absurd nature in order to prove whether an ambiguity exists. One key test courts use to determine whether a contract is ambiguous is to ask whether the contract language is "reasonably susceptible" to the interpretation being asserted. See Templin, Chapter 22, Section B.2, Is the term ambiguous?

7. In interpreting the intent of the parties, a court would consider language as a. the most important factor. b. of equal importance with course of dealing, trade usage, and course of performance. c. more important than trade usage but not as important as course of performance. d. the least important factor.

a. the most important factor. The correct answer is (a). See the discussion of the hierarchy of importance in Templin, Chapter 22, Section C.

5. A course of performance is a . by consistent conduct between the parties in relation to previous contracts of a sim ilar nature between the parties . b . based on repeated occasions for performance under the present contract

b . based on repeated occasions for performance under the present contract . The correct answer is (b). Restatement (Second) of Contracts §202(4), provides "Where an agreement involves repeated occasions for performance by either party with knowledge of the nature of the performance and opportunity for objection to it by the other, any course of performance accepted or acquiesced in without objection is given great weight in the interpretation of the agreement." See Templin, Chapter 22, Section C.2.

3. A latent ambiguity is one where a . the plain meaning of the term is uncertain on its face. b . to determine the ambiguity , additional evidence is needed other than the plain meaning of the term .

b . to determine the ambiguity , additional evidence is needed other than the plain meaning of the term . The correct answer is (b). A latent ambiguity requires additional outside evidence other than the plain meaning of the term in order to understand that the term is susceptible to more than one meaning. This is in contrast to a patent ambiguity. A patent ambiguity consists of language where the plain meaning of the language is either uncertain or reasonably susceptible to more than one meaning. See Templin, Chapter 22, Section B.2.b. Patent vs. Latent Ambiguities.

8. The term "ejusdem generis" refers to a secondary rule of interpretation that results in which of the following: a. The contract is interpreted against the party who was responsible for the ambiguity. b. The generic meaning of a term (i.e., the common, well-accepted meaning) is preferred to a secondary definition. c. A general term that follows specific terms in a list will be interpreted as being of the same class or kind as the specific terms. d. An illegal contract cannot be made legal through interpretation.

c. A general term that follows specific terms in a list will be interpreted as being of the same class or kind as the specific terms. The correct answer is (c). Ejusdem generis (Latin for "of the same kind") stands for the following principle: "Where specific terms describing persons or things are followed by general terms, then the general words should be interpreted as 'applying only to persons or things of the same kind or class as those expressly mentioned.' See the discussion of the hierarchy of importance in Templin, Chapter 22, Section C.