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Zuri Regisford

on 21 October 2013

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Transcript of OUTLINE

Objective Approach
interpreting meaning that is objectively reasonable.
The courts look to ascertain "common sense" and "plain and ordinary meaning" of contractual language.

Subjective Approach
Interpreting meaning by looking to the intentions of the parties.
It effectuates the parties' meaning by determining the parties' intentions and giving effect to them.
If one party knows or should have known the meaning intended by the other party, that meaning governs.

What do courts look to?
Some courts look at whether the provision is reasonably susceptible to more than one interpretation when read by an objective reader in the position of the parties.
Some courts look to the customs, practices, and terminology as generally understood by the particular trade or business.
Holistic Principles
Read the contract as a whole.
Terms should be read in context and should be harmonious throughout the contract.

Canons of Construction
Ejursdem generis- when a general word or phrase follows a list of specifics, the general word or phrase will be interpreted to include only items of the same type as those listed.
Expresio unius est exclusio alterus- to express or include one thing implies the exclusion of another.
The specific governs over the general.
Court Interprets Contract as a Matter of Law
If the provision is unambiguous, then the court should look ONLY to the text of the contract to determine the parties' intent.
Also known as the "four corners rule."
The best evidence of the intent of the parties is in the text of the contract.
Provision is unambiguous
Parties' Intent is a Question of Fact
Summary judgment is appropriate in this situation.
An ambiguity is generally interpreted against the drafter.
Provision is ambiguous
Types of Ambiguity
Semantic ambiguity- a word has multiple dictionary meanings.
Example- A contract between a Canadian manufacturer of ski equipment and a United States manufacturer that provides for payment of $10,000 upon the retailer's receipt of the merchandise.
However, dollars can mean either United States or Canadian dollars.
Syntatic ambiguity- when it is unclear what a word or phrase refers to or modifies.
Example- Sale of Shares. The Sellers shall sell their shares to the Buyer.
In this example, it is unclear whether each Seller is obligated to sell its Shares to the Buyer, or whether the Sellers are obligated to sell their jointly owned Shares to the Buyer.
Contextual ambiguity- when two provisions are inconsistent. The two provisions can be in the same or different agreements.
Example- Provision 1- Tenant's Obligations. The Tenant shall maintain the entire Building.
Provision 2- Landlord's Obligations. The Landlord shall maintain the lobby of the Building.
Canons of Contract Interpretation
Judicial Application

By: Danielle Razzouk & Zuri Regisford
A court determines what meanings the parties, when contracting, gave to the language used.
Contract Interpretation & Principles
What is ambiguity?
A contract or provision is ambiguous if it is reasonably susceptible to more than one interpretation.
A provision is not ambiguous simply because the parties disagree as to its meaning.
A court determines the legal operation of the contract- its effect upon the rights and duties of the parties.
A rule or principle, especially one accepted as fundamental.

Canon of Construction
A rule for construing legal instruments, especially contracts and statutes. Although a few states have codified the canons of construction, most jurisdictions treat the canons as mere customs not having the force of law.
The principal reason for preserving the distinction between interpretation and construction is a clarity of thought that may result.
The effort to choose a word which will clearly convey an idea to others is of great assistance to clarifying as to oneself the idea that is being expressed.

There is no "standard" that the law requires any contracting party to observe in choosing words or other modes of expression.

It is necessary to bear in mind that no one word or symbol in any language is ever used with a single and uniform meaning by all the people in any specified territory, large or small.
Restatement (Second) of Contracts
Richard Posner described contract interpretation as "the undertaking by a judge or a jury (or an arbitrator ...) to figure out what the terms of a contract are, or should be understood to be."
In the Restatement (Second) of Contracts, the standard of interpretation is implicit in its rules of interpretation:

§ 202. Rules In Aid Of Interpretation
(1) Words and other conduct are interpreted in the light of all the circumstances, and if the principal purpose of the parties is ascertainable it is given great weight.

(2) A writing is interpreted as a whole, and all writings that are part of the same transaction are interpreted together.

(3) Unless a different intention is manifested,
(a) where language has a generally prevailing meaning, it is interpreted in accordance with that meaning;

(b) technical terms and words of art are given their technical meaning when used in a transaction within their technical field.

(4) 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.

(5) Wherever reasonable, the manifestations of intention of the parties to a promise or agreement are interpreted as consistent with each other and with any relevant course of performance, course of dealing, or usage of trade.

Standard of Interpretation
Objective Interpretation
Subjective Interpretation

of Interpretation

Plain meaning
When writing statutes, the legislature intends to use ordinary English words in their ordinary senses.

Four Corners
Finding plain meaning in the four corners of the document, what is written in the contract. This doctrine considers the correct English definition and language usage of the document.

Some jurisdictions consider extrinsic evidence, evidence outside of the contract such as course of dealings and trade usage
Ejusdem generis ("of the same kinds, class, or nature")
When a list of two or more specific descriptors is followed by more general descriptors, the otherwise wide meaning of the general descriptors must be restricted to the same class, if any, of the specific words that precede them.

For example, where "cars, motor bikes, motor powered vehicles" are mentioned, the word "vehicles" would be interpreted in a limited sense (therefore vehicles cannot be interpreted as including airplanes).

Expressio unius est exclusio alterius ("the express mention of one thing excludes all others")
Items not on the list are impliedly assumed not to be covered by the statute or a contract term. However, sometimes a list in a statute or provision is illustrative, not exclusionary. This is usually indicated by a word such as "includes" or "such as."
Noscitur a sociis ("a word is known by the company it keeps")

When a word is ambiguous, its meaning may be determined by reference to the rest of the statute or provision.
Reddendo singula singulis or "Rule of the Last Antecedent" ("refers only to the last")

When a list of words has a modifying phrase at the end, the phrase refers only to the last, e.g., firemen, policemen, and doctors in a hospital.
Judicial Application

Cases & Examples
4. An ambiguity is generally construed against the drafter
(contra proferentum)

Wiser v. Enervest Operating, L.L.C.
803 F.Supp.2d 109
N.D.N.Y., March 22, 2011

Under New York law, as a general matter, a contract will be construed against its drafter since the drafter is responsible for any ambiguity.
Wiser v. Enervest Operating, L.L.C.
803 F.Supp.2d 109
N.D.N.Y., March 22, 2011
Under New York law, as a general matter, a contract will be construed
against its drafter since the drafter is responsible for any ambiguity.

C. Plain Meaning

In re Lehman Brothers Inc.
2012 WL 1995089
S.D.N.Y 2012, June 5, 2012

In the absence of ambiguity, a court is required to give the words of the contract their plain meaning. See Crane Co., 171 F.3d at 737.
That intent is derived “from the plain meaning of the language employed in the agreements,” . . . when the agreements are “read as a whole.”
When the parties' intent is clear— i.e., unambiguous—the contract “must be enforced according to the plain meaning of its terms.”
B. Subjective & Objective Interpretation

In re Motors Liquidation Co.
460 B.R. 603
Bkrtcy. S.D.N.Y, November 28, 2011

In determining “whether the language of the contract and the
inferences to be drawn from it are susceptible to more than one
reasonable interpretation”— i.e., ambiguous—the court looks to see
whether it is: capable of more than one meaning when viewed
objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.
3. If the provision is ambiguous, then summary judgment is not appropriate unless the parol evidence is uncontroverted or so one-sided that no reasonable person could decide otherwise

Corral v. Outer Marker LLC
2012 WL 243318
E.D.N.Y., January 24, 2012

“When the question is a contract’s proper construction, summary judgment may be granted when its words convey a definite and precise meaning absent any ambiguity.”

Where the language used is susceptible to differing interpretations, each of which may be said to be as reasonable as another, and where there is relevant extrinsic evidence of the parties’ actual intent, the meaning of the words become an issue of fact and summary judgment is inappropriate.”
D. Contract Should be Viewed in Light of the Circumstances

Wiser v. Enervest Operating, L.L.C.
803 F.Supp.2d 109
N.D.N.Y., March 22, 2011

Under New York law, when construing contractual provisions, a court must be mindful that contracts should be viewed in the light in which they were made.
2. If the provision is ambiguous, then extrinsic evidence can be used to determine the intent of the parties

Maser Consulting, P.A. v. Viola Park
Realty, LLC
--- N.Y.S.2d ----, 2012 WL 234081
N.Y.A.D. 2 Dept., January 24, 2012

Extrinsic evidence will be considered in interpreting a contract only if the contract is deemed ambiguous.

E. Two Interpretations

Convergent Wealth Advisors LLC v. Lydian Holding Co.
2012 WL 2148221
S.D.N.Y.,2012, June 13, 2012

Where a contract provision lends itself to two interpretations, a court will not adopt an interpretation that leads to unreasonable results, but instead will adopt the construction that is reasonable and that harmonizes the affected contract provisions. An unreasonable interpretation produces an absurd result or one that no reasonable person would have accepted when entering the contract.
E. When a provision is ambiguous
1. If the provision is ambiguous, then the parties’ intent becomes a question
of fact

Reyes v. Metromedia Software, Inc.
--- F.Supp.2d ----, 2012 WL 13935
S.D.N.Y., January 04, 2012

“However, when the meaning of the contract is ambiguous and the
intent of the parties becomes a matter of inquiry, a question of fact is

2. If the provision is unambiguous, then the court should look only to the text
of the contract to determine the parties’ intent (“four-corners rule”)

Hillside Metro Associates, LLC v.
JPMorgan Chase Bank, Nat. Ass'n
2012 WL 1617157
E.D.N.Y.,2012, May 09, 2012

“The best evidence of what the parties to a written agreement intend is
what they say in their writing.” Niagara Frontier Transp. Auth. v. Euro–
United Corp., 757 N.Y.S.2d 174, 176 (4th Dep't 2003) (“When
interpreting a written contract, the court should give effect to the intent
of the parties as revealed by the language and structure of the contract
A. Determining the Intent of the Parties

Hillside Metro Associates, LLC v. JPMorgan Chase Bank, Nat. Ass'n
2012 WL 1617157
E.D.N.Y.,2012, May 09, 2012

The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent.
D. When a provision is unambiguous
1. If the provision is unambiguous, then the court interprets the contract as a matter of law

Himmelberger v 40-50 Brighton First
Rd. Apts. Corp.
94 A.D.3d 817, 943 N.Y.S.2d 118
N.Y.A.D. 2 Dept., 2012, April 10, 2012

In those instances where the intent of the parties is clear and unambiguous from the language employed on the face of the agreement, the interpretation of the document is a matter of law solely for the court.
F. Whether a Contract or Provision is Determined by the Court as a Matter of Law

Syncora Guar. Inc. v. EMC Mortg. Corp.
2012 WL 2326068
S.D.N.Y.,2012, June 19, 2012

Under New York law, “the initial interpretation of a contract is a matter of law for the court to decide.” K. Bell & Assocs., Inc. v. Lloyd's
Underwriters, 97 F.3d 632, 637 (2d Cir. 1996).
iii. The specific governs over the general

MBIA Ins. Corp. v. Patriarch Partners
Slip Copy, 2012 WL 382921
S.D.N.Y., February 06, 2012

Well-settled rules of contract construction require that a contract be construed as a whole, giving effect to the parties' intentions. Specific language in a contract controls over general language, and where specific and general provisions conflict, the specific provision ordinarily qualifies the meaning of the general one.
ii. Expresio unius est exclusio alterus (to express or include one thing
implies the exclusion of another)

Concord Real Estate CDO 2006-1, Ltd.
V. Bank of America N.A.
996 A.2d 324, Del Chancery Court
May 14, 2010

Under New York law, doctrine of inclusio unius est exclusio alterius is not a rule of law and is not always dispositive, and need not be mechanically applied.
G. Canons of Construction

In re South Side House, LLC
2012 WL 907758
Bkrtcy. E.D.N.Y., 2012, March 16, 2012

“General canons of contract construction require that where two seemingly conflicting contract provisions reasonably can be reconciled, a court is required to do so and to give both effect.”
b. Canons of Construction
i. Ejusdem generis (when a general word or phrase follows a list of
specifics, the general word or phrase will be interpreted to include
only items of the same type as those listed)

Stewart v. Barber
182 Misc. 91, 43 N.Y.S.2d 560
July 19, 1943

The prohibitive words under construction are ‘manufacture’, ‘business', ‘trade’ or ‘occupation’. The rule of ejusdem generis is, merely, when words having a specific meaning are followed by word or phrase of general meaning, the latter is to be construed to refer to things of the same general kind or nature as referred to by the words of specific meaning. The elementary purpose of the doctrine of ejusdem generis is to aid the Court in determining the true meaning and intent of the language employed. If the meaning be clear and unambiguous from the language used, there is no need for or purpose of invoking the doctrine. The canon of construction embodied in the doctrine of ejusdem generis is used by the Court only to ascertain the intention of the parties, and it may be resorted to only where there is an ambiguity in the instrument which obscures the true intention. There is no thing ambiguous about the words ‘manufacture’, ‘business', ‘trade’ or ‘occupation’.
H. Contracts Should be Read Together

Edelman Arts, Inc. v. Art Intern, Ltd.
2012 WL 183641
S.D.N.Y., January 24, 2012

Under New York law, “all writings which form part of a single transaction and are designed to effectuate the same purpose must be read together.”
I. Definitions
II. Canons of Interpretations
Restatement of Contracts
Standard of Interpretation
Subjective & Objective
III. Contract Interpretation & Principles
Distinguish ambiguous and unambiguous
IV. Judicial Application
Cases and Examples

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