Civil Model Jury Charge 4.10 H. INTERPRETATION OF CONTRACT TERM BILATERAL
CONTRACTS
1. No
Dispute over Meaning
In
this case, the plaintiff and the defendant agreed to various terms that are
part of the contract. Under these terms,
the plaintiff was required to:
[State
Terms]
The defendant
was required to:
[State
Terms]
NOTE TO JUDGE
When the contract terms are
unambiguous, construction of the contract is a question of law for the courts.[1] The preceding charge is to be used where the
parties do not dispute the existence of a contract, the terms are unambiguous
and the basic dispute is over whether the contract terms were breached by
either party. In such a case, the
preceding may be incorporated by charging the above immediately following the
first sentence in 4.10A.
2. Dispute
over Meaning
NOTE TO JUDGE
When the contract terms are
ambiguous and the parties dispute their meaning, construction of the contract
and application of any evidence submitted to prove the surrounding
circumstances are for the jury.[2]
The
plaintiff claims the following terms were part of the contract.
[State Terms]
Plaintiff
further claims that the parties intended this language to mean [state meaning]. The defendant denies this. The defendant contends that [state meaning]. You must decide whether the plaintiff is
correct.
The plaintiff
has the burden to prove what the parties intended the contract to mean. The contract is to be interpreted so as to
give effect to the parties’ intentions.
You cannot make for the parties a better contract than the parties made
for themselves.[3] It is the intent expressed or apparent in the
writing that controls.[4]
[The
interpretive principles which follow are not intended to be exhaustive,[5] but they are intended to cover the most frequently utilized
principles.]
In deciding
what the parties intended, you may consider the relations of the parties, the
attendant circumstances and the result the parties sought to attain.
A supporting or
less significant provision of the contract is not to be interpreted to conflict
with an obvious, dominant or principal purpose of the contract.[6]
You should
carefully consider the wording that was used in the contract. The terms of a contract, generally, are to be
understood in their plain ordinary sense.
The contract is to be considered as a whole and its provisions are to be
read together.
The conduct of
the parties, however, after they entered into the contract and before they
discovered that they disagreed with one another, can be significant evidence of
their agreed intent.[7] It is up to you to decide what the conduct of
the parties was, whether the conduct is reasonably related to the terms in
question and whether it reveals what they intended by the contract.
A course of
dealing is the manner by which parties to the contract have previously dealt
with each other. Such a course of
previous dealing, can, unless specifically rejected in the contract, fairly be
regarded as establishing a basis for interpreting and giving meaning to the
parties’ intention as it relates to this contract.
If any contract
words or terms have a technical meaning, or as used in a trade or by custom
mean something different from their ordinary meaning, you shall give them their
technical trade or custom meaning if (1) the contract was made in view of this
technical meaning, trade or custom usage, and (2) the technical meaning or
trade or custom usage was either generally used or was actually known to the
parties.
NOTE TO JUDGE
The following instruction is appropriate if the contract was drafted by
just one of the parties. No case has
been located which approves this instruction as modified and applied to
particular paragraphs when the entire contract has been the product of joint
drafting.
If you have considered all of the
evidence to ascertain the intentions of the parties and you are still unable to
decide what the parties originally intended the disputed contract language to
mean, then that language as it exists should be interpreted against the party
who wrote the contract.[8]
Although the general rule is that ambiguity in a contract provision should be
resolved against the drafter,[9]
the ambiguous provision must still be read sensibly and consistent with the
expressed intent of the parties.[10]
[2]State Farm Mutual Auto Insurance Co., supra.
[3]Karl’s Sales & Service v. Gimbel
Brothers, 249 N.J. Super. 487,
493 (App. Div. 1991), certif. denied,
127 N.J. 548 (1991).
[5]See
Restatement (Second) of Contracts,
Sec. 201 (Whose Meaning Prevails), Sec. 202 (Rules in Aid of Interpretation),
Sec. 203 (Standards of Preference in Interpretation) and Sec. 204 (Supplying an
Omitted Essential Term) (1981).
[8]It
may be argued that when the non-drafting party is “sophisticated,” the rule
that ambiguity should be resolved against the drafter should not apply. The Supreme Court has addressed the issue in
the analogous case of insurance contracts, which arguably involve drafters who
often exercise greater control and are therefore less deserving of an exception
to the rule than drafters of other contracts.
The Supreme Court stated that the rule that ambiguous insurance
contracts are construed against the insurer would not apply in the case of a
sophisticated insured. See Owens-Illinois, Inc. v. United Ins. Co.,
138 N.J. 437, 471 (1994). (“As the Appellate Division noted, ‘O-I was a
sophisticated insured and cannot seek refuge in the doctrine of strict
construction by pretending it is the corporate equivalent of the unschooled,
average consumer.’”) However, the law is
not entirely clear as to what qualifies a party as a “sophisticated”
insured. The Appellate Division in Owens-Illinois, Inc. described the law
in other jurisdictions to be that “only where it is clear that an insurance
policy was actually negotiated or jointly drafted,’ and where the policyholder
has bargaining power and sophistication, is the rule of strict construction of
policy terms against the insurer not invoked.”
Owens-Illinois, Inc. v. United
Ins. Co., 264 N.J. Super. 460,
489 (App. Div. 1993), rev’d on other
grounds, 138 N.J. 437 (1994). See
also Diamond Shamrock Chem. Co. v. Aetna Casualty & Surety Co., 258 N.J. Super. 167, 209 (App. Div. 1992), certif. denied, 134 N.J. 481 (1993). If
“sophisticated” is simply shorthand for a co-drafter, then the rule that
ambiguity is resolved against the drafter would not apply simply because both
parties drafted the contract. However,
if the sophisticated party with bargaining power “negotiated” the substance of
a contract term, but did not actually draft the contract language, perhaps he
or she would not enjoy the benefits of the rule of interpretation.
