Opinion ID: 526531
Heading Depth: 1
Heading Rank: 6

Heading: Should the District Court Have Considered Evidence of

Text: Custom and Trade Usage in Interpreting the 35 Subcontract? 36
37 A & M/C argues that a court must first determine the existence of an ambiguity before it allows parol evidence, including evidence of custom and trade usage, to be admitted. The district court arrived at a contrary conclusion, ruling that trade usage can be used to determine whether a contract is ambiguous. In other words, according to the district court, a contract is not ambiguous if it is susceptible to a single interpretation according to the usage of trade, even if those terms are not susceptible to a single plain meaning. 38 In Gray v. Headley, 35 Ariz. 232, 238, 276 P. 523 (1929), a case relied upon by A & M/C, the Arizona Supreme Court held that because there was a clear understanding between the parties, parol evidence concerning the customary meaning of a contract term was inadmissible. The situation in the instant case is distinguishable since the parol evidence is needed to demonstrate the existence of a clear understanding between the parties. 39 In Coury Bros. Ranches, Inc. v. Ellsworth, 103 Ariz. 515, 521, 446 P.2d 458 (1968), another case cited by A & M/C, the court did state that [c]ustom or usage is only justified when there is an ambiguity or uncertainty in the written instrument. In Coury, though, the contract explicitly and unambiguously provided for specific irrigation of land. The court excluded contradictory evidence of custom and usage regarding irrigation as violative of the parol evidence rule. In contrast, the extrinsic evidence in the instant case clarifies, rather than contradicts, the contractual terms. 40 Arizona law supports the district court's reliance on custom and usage. Specifically, parol evidence is admissible to assist in the interpretation of the contract, or to prove the usages and customs in relation to which the parties contracted, thus allowing the addition of consistent terms of performance or the definition of words used in the contract. Arnold v. Cesare, 137 Ariz. 48, 51, 668 P.2d 891 (Ct.App.1983); see also Rio Grande Oil Co. v. Upton Oil Co., 33 Ariz. 474, 479, 266 P. 3 (1928) ([P]arole evidence is admissible to show that the terms used therein have acquired by the custom of the locality or by the usage of the trade peculiar significance.... [even though] the terms used may not of themselves appear to be ambiguous.). Furthermore, according to the Restatement (Second) of Contracts Sec. 222(3) (1981) 2 : 41 Unless otherwise agreed, a usage of trade in the vocation or trade in which the parties are engaged or a usage of trade of which they know gives meaning to or supplements or qualifies their agreement. 42 See also Restatement (Second) of Contracts Secs. 219-21, 222(1-2), 223 (1981). 43
44 UE & C further argues that because A & M/C failed to object to the introduction of custom and usage evidence at trial, it cannot raise the issue on appeal. It is of interest to note that the case cited by UE & C to support its argument on this point actually comes up with the opposite conclusion based on Washington substantive law. Specifically, according to Anderson v. Owens, 205 F.2d 940, 942 (9th Cir.1953), parol evidence may not be used to alter the terms of a contract whether that evidence be objected to or not, though unlike the situation in Anderson, the parol evidence in the instant case is arguably used to clarify, not alter, the contract. 45 In fact, although there is a general principle that failure to object at trial to the admission of evidence constitutes a waiver of the right to appeal, ESCO Corp. v. United States, 750 F.2d 1466 (9th Cir.1985), this waiver principle is not applied to the admission of parol evidence in jurisdictions where the parol evidence rule is considered a rule of substantive law. 4 S. Williston, A Treatise on the Law of Contracts Sec. 631, p. 961. 3 In Arizona, the parol evidence rule is a rule of substantive law. Rental Dev. Corp. of Am. v. Rubenstein Constr. Co., 96 Ariz. 133, 393 P.2d 144 (1964). 46