UNDERSTANDING HOW THE COURTS WILL INTERPRET YOUR CONTRACT

A well drafted, written contract expresses the intent of the parties in clear language without any ambiguity. For that reason, when a court interprets a written contract, it seeks “to determine the intent of the parties from the language used interpreted in the light of the situation of the parties and the circumstances connected with the transaction.” MJM Indus. v. Henley Co., 2020 Conn. Super. LEXIS 427, *6. In fact, according to the “parol evidence rule,” if the written contract contains the full expression of the parties’ agreement, a court is generally not allowed to look beyond the language of the written agreement itself. The prior negotiations between the parties will be considered irrelevant. Anything that may have been said verbally or in writing during the parties’ contract negotiations that was not made part of the final written contract is typically not enforceable by either party.

A contract that contains the full agreement of the parties is referred to as a fully integrated agreement. Again, “[i]n order to determine whether a written agreement is integrated, a court must look to the intention of the parties.” Giorgio v. Nukem, Inc., 31 Conn. App. 169, 175. “Evidence concerning the intention of the parties may be found in the conduct and language of the parties and the surrounding circumstances. Id. For that reason, if the parties include a provision stating that this written contract contains the full agreement between the parties, which is referred to as an “integration clause,” the court will consider such a provision as “conclusive evidence that the parties intended to create a fully integrated agreement to which the parol evidence rule would apply.” MJM Indus. v. Henley Co., 2020 Conn. Super. LEXIS 427, *8-9.

Once a court determines that a contract is fully integrated, it typically will not look to any evidence outside of the contract itself to determine the meaning of the contract because of the parol evidence rule. The part that is hard to understand, however, is that the parol evidence rule does not preclude consideration of extrinsic evidence, i.e. evidence of the parties’ prior negotiations, for all purposes. “Such evidence may still be admissible if relevant (1) to explain an ambiguity appearing in the instrument; (2) to prove a collateral oral agreement which does not vary the terms of the writing; (3) to add a missing term in a writing which indicates on its face that it does not set forth the complete agreement; or (4) to show mistake or fraud. . . . These recognized ‘exceptions’ are, of course, only examples of situations where the evidence (1) does not vary or contradict the contract’s terms, or (2) may be considered because the contract has been shown not to be integrated; or (3) tends to show that the contract should be defeated or altered on the equitable ground that relief can be had against any deed or contract in, writing founded in mistake or fraud.” Id. *9-10.

When the court interprets a contract, “the intent of the parties is to be ascertained by a fair and reasonable construction of the written words and . . . the language used must be accorded its common, natural, and ordinary meaning and usage where it can be sensibly applied to the subject matter of the contract.” MJM Indus. v. Henley Co., 2020 Conn. Super. LEXIS 427, *6-7. “A contract is unambiguous when its language is clear and conveys a definite and precise intent . . . The court will not torture words to impart ambiguity where ordinary meaning leaves no room for ambiguity . . . Moreover, the mere fact that the parties advance different interpretations of the language in question does not necessitate a conclusion that the language is ambiguous . . . [A]ny ambiguity in a contract must emanate from the language used by the parties . . . [For example,] [i]f the language of the contract is susceptible to more than one reasonable interpretation, the contract is ambiguous.” Id.

When there is a contract dispute that turns into a lawsuit, the parties are often at odds over what the contract means. However, when it comes to commercial and/or public works projects, the final contracts are often the result of negotiations between sophisticated entities and are often intended as the full and final agreement between the parties. In those situations, evidence of the parties’ prior negotiations will most likely not be inadmissible. Still, to the extent that there are any ambiguities in the contract, such parol evidence may be admitted in order to explain any such ambiguities. The important point to remember that whether the written contract or any portion of the written contract is ambiguous will be judged by the court on a completely objective basis. The contention by one party or the other that a contract or contract provision is ambiguous is irrelevant if the court objectively does not consider the contract or contract provision ambiguous. These are important considerations in analyzing any construction contract claim, because disputes over the interpretation of the contract typically involve significant dollar amounts.

If you should have any questions with regard to interpreting your contracts, please give me a call at (203) 640-8825.

Scott Orenstein

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