Title: Air Safety, Inc. v. Teachers Realty Corp.
Citation: N/A
Docket Number: 85005
State: Illinois
Issuer: Illinois Supreme Court
Date: January 22, 1999

Air Safety v. Teachers Realty Corp., No. 85505 
(Ill. S.Ct.) 
Docket No. 85005-Agenda 13-November 
1998.
Opinion filed January 22, 
1999.
JUSTICE HEIPLE delivered the opinion of the 
court:
May extrinsic evidence be provisionally admitted 
to show that an explicitly integrated, facially clear, and complete written 
contract is actually ambiguous? In this action for declaratory relief, the 
circuit court of Cook County and the appellate court (No. 1-96-3615 (unpublished 
order under Supreme Court Rule 23)) answered no. We agree, and therefore 
affirm.
FACTS
On February 1, 1990, the plaintiff, Air Safety 
Engineering (Air Safety), entered into a contract with the defendant, Teachers 
Realty Corporation (Teachers). This contract provides that Air Safety would 
perform numerous specified asbestos abatement projects on a high-rise office 
building owned by Teachers at 230 West Monroe Street, Chicago, Illinois. 
Allowing for changes to be made to the original agreement, section 12.1.2 of the 
contract provides:
"The Owner, without invalidating the Contract, 
may order changes in any Unit of Work within the general scope of the Contract 
consisting of additions, deletions or other revisions, and the Contract Sum and 
the Contract time applicable thereto shall be adjusted accordingly. All such 
changes in Work shall be authorized by change order, and shall be performed 
under the applicable conditions of the Contract Documents."
Additionally, section 14.7 of the contract 
states that the "Contract represents the entire and integrated agreement between 
the parties hereto and supersedes all prior negotiations, representations, or 
agreements, either written or oral."
In 1991, during Air Safety's performance of the 
contract, Teachers, through its agent Miglin-Beitler, solicited bids for 16 
additional asbestos abatement projects at the 230 West Monroe location. This 
solicitation for bids requested that contractors submit two prices for each 
project-one price for the cost of performing an individual project without award 
of all 16 projects, and another price reflecting a discounted amount for each 
project if the contractor were awarded all of the projects.
Three contractors, including Air Safety, 
submitted bids. Eventually, Teachers' engineer, Environmental Science 
Engineering, recommended that Air Safety perform all of the projects listed in 
the 1991 bid solicitation. However, no written contract was ever executed 
between Teachers and Air Safety respecting an award of all the new projects to 
Air Safety. Rather, three change orders to the 1990 contract were executed which 
authorized Air Safety to perform only some of the projects. Each of the three 
change orders, orders 50, 51, and 53, states that it is a change order to the 
1990 contract and includes: (1) a description of the work; (2) the original cost 
of the 1990 contract; (3) the contract sum prior to the change order; (4) the 
increase in cost due to the change order; (5) and the new contract cost. 
Additionally, each change order references a letter from Miglin-Beitler which 
gives a fixed price for each project and authorizes Air Safety to begin work. 
The fixed prices listed in the Miglin-Beitler letters and the change orders are 
the prorated bid amounts Air Safety submitted pursuant to the 1991 bid 
solicitation if it were awarded all sixteen projects.
Air Safety, however, was never authorized to 
perform work on any other projects not authorized by the three change orders. 
Rather, these projects were awarded and ultimately completed by other 
contractors. Consequently, Air Safety filed this action for declaratory relief 
in the circuit court of Cook County seeking a declaration that: (1) the 1991 bid 
solicitation ripened into a contract between Air Safety and Teachers for all 16 
projects; and (2) Air Safety was entitled to the nonprorated amounts for each 
project listed in its original bid since it was not ultimately given all of the 
projects. In support of its claim, Air Safety argued that the prorated amounts 
for the projects listed in the change orders evidenced the fact that it had been 
awarded all 16 projects. Additionally, Air Safety submitted other evidence which 
it claimed showed that an oral contract had been entered into concerning all of 
the projects contained in the 1991 bid solicitation.
Teachers filed a motion for partial summary 
judgment, arguing that the merger doctrine and the parol evidence rule precluded 
the finding of a second contract. Specifically, Teachers posited that because 
the change orders were executed pursuant to the 1990 contract, the evidence 
presented by Air Safety merged into the 1990 contract via the 1990 contract's 
integration clause contained in section 14.7. Moreover, Teachers argued that 
because the change orders are facially clear and unambiguous changes to the 1990 
contract, the extrinsic evidence presented by Air Safety is inadmissible to 
contradict or vary the terms of the change orders.
The circuit court agreed and found that: (1) the 
change orders at issue were executed pursuant to the 1990 contract; (2) the 
change orders are clear, complete, and unambiguous; (3) the court would not 
consider evidence that predated the orders to materially alter or contradict the 
express terms of the orders; (4) the parties are bound by the prices listed in 
the change orders; and (5) there is no contract for additional projects at 230 
West Monroe. The appellate court affirmed.
ANALYSIS
Traditional contract interpretation principles 
in Illinois require that:
This approach is sometimes referred to as the 
"four corners" rule. See, e.g., URS Corp. v. Ash, 101 Ill. 
App. 3d 229, 234 (1981).
In applying this rule, a court initially looks 
to the language of a contract alone. See Rakowski v. Lucente, 104 Ill. 2d 317, 323 (1984) (stating that both the meaning of a written agreement and the 
intent of the parties is to be gathered from the face of the document without 
assistance from extrinsic evidence). If the language of the contract is facially 
unambiguous, then the contract is interpreted by the trial court as a matter of 
law without the use of parol evidence. Farm Credit Bank v. Whitlock, 
144 Ill. 2d 440, 447 (1991). If, however, the trial court finds that the 
language of the contract is susceptible to more than one meaning, then an 
ambiguity is present. Whitlock, 144 Ill. 2d  at 447. Only then may parol 
evidence be admitted to aid the trier of fact in resolving the ambiguity. 
Whitlock, 144 Ill. 2d  at 447.
In the present case, the trial court applied the 
four corners rule and concluded that the change orders were facially clear, 
complete, and unambiguous documents executed pursuant to the 1990 contract. 
Thus, the trial court refused to look beyond the contract for some hidden 
ambiguity. Air Safety does not directly challenge the trial court's finding that 
the change orders were facially unambiguous. Rather, Air Safety argues 
that this court should abandon the four corners rule and instead adopt the 
"provisional admission" approach to contract interpretation (sometimes also 
referred to as the "extrinsic ambiguity" approach).
Under the provisional admission approach, 
although the language of a contract is facially unambiguous, a party may still 
proffer parol evidence to the trial judge for the purpose of showing that an 
ambiguity exists which can be found only by looking beyond the clear language of 
the contract. See Ahsan v. Eagle, Inc., 287 Ill. App. 3d 788, 790 
(1997). Under this method, an extrinsic ambiguity exists "when someone who knows 
the context of the contract would know if the contract actually means something 
other than what it seems to mean." Ahsan, 287 Ill. App. 3d at 790. 
Consequently, if after "provisionally" reviewing the parol evidence, the trial 
judge finds that an "extrinsic ambiguity" is present, then the parol evidence is 
admitted to aid the trier of fact in resolving the ambiguity. Ahsan, 
287 Ill. App. 3d at 791.
This provisional admission approach has been 
applied by the Illinois appellate court in a variety of cases. See, 
e.g., Ahsan, 287 Ill. App. 3d at 790; Meyer v. Marilyn 
Miglin, Inc., 273 Ill. App. 3d 882, 889 (1995); USG Corp. v. Sterling 
Plumbing Group, Inc., 247 Ill. App. 3d 316, 318 (1993); Rybicki v. 
Anethesia &amp; Analgesia Associates, Ltd., 246 Ill. App. 3d 290, 298-300 
(1993); Zale Construction Co. v. Hoffman, 145 Ill. App. 3d 235, 241-42 
(1986); URS Corp. v. Ash, 101 Ill. App. 3d 229, 234-35 (1981); Keep 
Productions, Inc. v. Arlington Park Towers Hotel Corp., 49 Ill. App. 3d 
258, 263 (1977). This court, however, has never formally adopted the provisional 
admission approach, and we decline to do so today because the contract in the 
case before us contains an explicit integration clause.(1)
In Armstrong Paint &amp; Varnish Works v. 
Continental Can Co., 301 Ill. 102 (1921), this court stated:
Moreover, where parties formally include an 
integration clause in their contract, they are explicitly manifesting their 
intention to protect themselves against misinterpretations which might arise 
from extrinsic evidence.
During contract negotiations, a party may 
propose terms, conditions, and provisions which are ultimately rejected in order 
to reach a compromise with the other party. That other party, of course, may do 
the same. The integration clause makes clear that the negotiations leading to 
the written contract are not the agreement. Accordingly, considering 
extrinsic evidence of prior negotiations to create an "extrinsic ambiguity" 
where both parties explicitly agree that such evidence will 
not be considered ignores the express intentions of the parties and 
renders integration clauses null.
Although Air Safety argues that the four corners 
rule is flawed because it assumes precision in language that cannot exist and 
requires the judge to determine the true intent of the parties in a transaction 
that is removed in time and circumstances, Air Safety explicitly 
contracted that its agreement be interpreted subject to these purported 
flaws. An integration clause such as the one in the present case is a clear 
indication that the parties desire the contract be interpreted solely according 
to the language used in the final agreement. Consequently, we will not write the 
integration clause out of the contract for policy reasons. Air Safety was free 
to negotiate a contract omitting the integration clause. It did not, and it is 
bound by its bargain.
The facts in this case cogently illustrate the 
wisdom of the four corners rule where the parties have agreed that their 
contract be integrated. Air Safety agreed to the 1990 contract containing the 
provision which stated that the written agreement superseded "all prior 
negotiations, representations, or agreements, either written or oral." Later, it 
agreed to the change orders explicitly executed pursuant to that 1990 
contract. Nowhere do the change orders reference some "other" agreement. 
Now, however, Air Safety asks this court to: (1) ignore the integration clause 
by considering prior negotiations and representations, both oral and written; 
and (2) hold that, despite the unmistakably clear inclusion of the contract date 
as 1990 on the change orders, the orders are not really part of that 1990 
agreement, but constitute some new contract. The question arises, what is the 
value of a writing when the words therein have lost their meaning? When movie 
producer Sam Goldwyn was asked the value of an oral contract, he 
advised, "An oral contract isn't worth the paper it's written on." If we 
departed from the four corners rule, the written contract here might be worth 
little more.
Finally, we hold that Air Safety's contention 
that the four corners rule was misapplied in the courts below is without merit. 
First, Air Safety argues that the merger doctrine and the parol evidence rule 
should not apply here because the change orders were executed in only 
partial performance of an agreement for all 16 projects. Second, Air Safety 
argues that the merger doctrine should not exclude extrinsic evidence because 
this extrinsic evidence is actually part of a second contract for all 16 
projects. These arguments, of course, assume the existence of an agreement 
for all 16 projects. Establishing the existence of such an agreement, however, 
is dependent upon the extrinsic evidence excluded by the four corners rule. Air 
Safety cannot use the very evidence banned by the four corners rule to show that 
an exception applies which will allow the use of that evidence. The arguments 
are clearly circular and without merit.
CONCLUSION
For the reasons stated, we hold that the four 
corners rule precludes the consideration of extrinsic evidence where a contract 
contains an integration clause and is facially unambiguous. Thus, Air Safety is 
bound by the language of the 1990 contract and the change orders executed 
pursuant to that contract.
The judgments of the appellate and circuit 
courts are affirmed.
Affirmed.
Footnote:
1. We expressly decline to rule on whether the provisional 
admission approach may be applied to interpret a contract which does not contain 
an integration clause until such a case is squarely before the 
court.