Opinion ID: 265276
Heading Depth: 1
Heading Rank: 1

Heading: The Contract Interpretation Issue.

Text: 10 We cannot accept the District Court's view that the meaning of clause 2.b. (1) of the barter contracts is so evident on its face as to bar the interpretation contended for by the plaintiffs. The court erred in disregarding all the oral testimony and documentary evidence proffered by the plaintiffs, in reaching its conclusion as to the effect of section 2.b. (1) of the barter contracts. The better rule is that such evidence is always admissible where relevant to the interpretation of a contract, for the parol evidence rule-- that extrinsic evidence is not admissible to vary or contradict the terms of a written contract-- comes into operation only when the meaning of that which may not be varied or contradicted is determined. See 3 Corbin, Contracts (1960 Ed.) 579; Arnold Prods., Inc. v. Favorite Films Corp.,298 F.2d 540 (2 Cir. 1962); Peerless Casualty Co. v. Mountain States Mut. Casualty Co., 283 F.2d 268 (9 Cir. 1960); Tobin v. Union News Co., 18 A.D.2d 243, 239 N.Y.S.2d 22 (4 Dept. 1963), affd. 13 N.Y.2d 1155, 247 N.Y.S.2d 385, 196 N.E.2d 735 (1964); Garden State Plaza Corp. v. S. S. Kresge Co., 78 N.J.Super. 485, 189 A.2d 448, 454 (1963). The provision in question is not wholly unambiguous, for the clause does not by its terms relate solely to 'existing' contracts between the plaintiffs and GSA. 11 Finally, the District Court relied on some extrinsic evidence in reaching its conclusion on the proper interpretation of section 2.b. (1). This was a telegram on April 4, 1956 from Earl M. Hughes, CCC's Executive Vice President, to Asheville accepting an offer to supply 35,000 pounds of block and film mica. The telegram contained a sentence that 'the exchange value    will be based on the unit prices    currently in effect under purchase contracts you have with General Services Administration, subject to any increase or any decrease in said prices effective as of the dates any such contract price changes are agreed to in writing by GSA.' The court felt that 'the telegram formed the basis for the language used in section 2.b. (1) of the mica barter contracts   ' It also considered certain letters between officials in GSA and those in CCC, during March 1956, in reaching its conclusion. Having considered the letters and telegrams, we think it was necessary also for the Court to consider the deposition of Clifford H. McClain, the chief of the CCC branch who negotiated the contract and drafted the telegrams and letters for the CCC, as to what was intended by them, as well as other correspondence and testimony in the record. There is no preferential rule for parol evidence. 12 McClain's testimony was clear that the telegram's reference to the existing contract was for the purpose of identifying the voluminous pricing schedules of the various types of mica already being purchased by GSA, and which would be acquired by CCC under the barter contract. He flatly stated that he did not intend the language to limit price changes under the barter contracts to changes in GSA contracts in existence at the time they were executed. Mr. McClain, Mr. Crim of the GSA, and the various officials of the plaintiffs all testified without contradiction that the purpose of the 'escalator' clause was to assure price parity among the various contractors, in view of the facts that the mica market was extremely sensitive, and that even a slight difference in price might result in the loss of supplies to contractors who could not meet it. It was also made clear at the trial that the escalator clause was proposed by officials of the GSA who were advising CCC in instituting the latter's mica procurement program. In fact, all the mica which CCC acquired through the barter contracts was later turned over to GSA, which stockpiled it. 13 The CCC has given no convincing argument for reading this provision in the narrow and technical way it urges. It seems clear that the purpose of the 'escalator' clause was to preserve price parity between the mica acquired by GSA and that by CCC. If so, it would surely defy reason to hold that different conseqeunces should flow from a formal decision by GSA, not a party to this contract, to enter into new contracts with its suppliers rather than extend the life of the old ones. The testimony of the men who participated in the negotiations and drafting of the contracts that such result was not contemplated is most persuasive. 14 To be sure, CCC does points to certain differences between the old and new GSA contracts with a view toward showing that it would be inequitable to make the prices it has to pay depend on the latter. Thus, it urges that such facts as a price increase of 20% Granted by GSA in 1954 for Brazilian mica but not Indian mica, and the presence of special price terms in the new GSA contracts for certain suppliers 2 work to deny a policy of price uniformity. However, all these discrepancies were convincingly explained by the trial testimony. Thus, the purpose of the 1954 increase for Brazilian mica was to compensate suppliers there for higher wages to their employees, made necessary by a general order of the Brazilian government. Again, the various special price provisions in the new GSA contracts with certain of the plaintiffs simply meant that, because they were in default in deliveries under the old contracts, the initial quantities of mica delivered under the new contracts would be at the old, lower price. The CCC's evidence falls far short of demonstrating that price uniformity between the GSA and CCC contracts was not an expectation of the parties, or that the GSA decision to make new contracts was in any way significant for this purpose. What we have said thus far indicates that we believe that plaintiffs Loeb and United proved their case to the extent that judgment against them was erroneous. The contentions of the other appellants, however, raise a rather different question. The language of clause 2.b. (1) in all the contracts refers to agreements between GSA and the 'contractor,' and the term 'contractor' is specifically defined as the particular contracting party. It is evident that to adopt the construction argued for by Asheville, Schwab, Munsell and Manchard, and hold that their right to higher prices accrued not from the date of their own new contracts but from the date of Loeb's, requires considerably more by way of interpretation than to adopt Loeb's and United's version of the agreement. Because of the District Court's view of section 2.b. (1) it did not reach this issue, or several other points raised in the pre-trial order which was entered on September 27, 1962 and fixed, among other things, the issues to be decided by the trial judge. We believe that, since the case must be remanded for determination of these points, it would be best to have its views on this question of fact, subject to our later review limited to whether the finding as to what was intended was 'clearly erroneous.' We remand for further findings on this issue. 15