Opinion ID: 3000154
Heading Depth: 3
Heading Rank: 1

Heading: Unilateral termination

Text: Sound of Music first argues that section 15.0(D) did not allow 3M to unilaterally terminate the agreement. Instead, Sound of Music contends that both parties must agree to end the relationship for termination under section 15.0(D) to be proper. To support its argument, Sound of Music points first to the introductory language in paragraph 15.0, which provides that the agreement may be terminated by “the parties” (plural, Sound of Music emphasizes) for the reasons that follow it. Sound of Music also points to sections A and B of paragraph 15.0, which specifically provide that 8 No. 05-4109 “either” party may terminate the agreement. Because the “either party” language does not appear in section D, and the introductory language to the entire paragraph provides that termination may occur by “the parties,” Sound of Music concludes that termination under 15.0(D) can only occur if both parties agree to terminate the agreement. We do not read the agreement as Sound of Music does. First, the introductory “by the parties” phrase does not contain any limitation on which party may use the provisions that follow it, and neither the paragraph’s introductory language nor section 15.0(D) states that consent of both parties is necessary for proper termination. In addition, that termination pursuant to section 15.0(D) is contingent upon sufficient advance notice suggests that consent is not required, as advance notice would not seem critical if a party could simply decline to agree to a proposed termination. At best, the language in section 15.0(D) is ambiguous, meaning that it is susceptible to more than one meaning. See Hous. and Redev. Auth. of Chisholm v. Norman, 696 N.W.2d 329, 337 (Minn. 2005). When a contract is ambiguous, a court may examine extrinsic evidence to ascertain the meaning of the contract. Hickman v. SAFECO Ins. Co. of Am., 695 N.W.2d 365, 369 (Minn. 2005); Norman, 696 N.W.2d at 337. If the extrinsic evidence is conclusive, the proper reading of the contract is not a question of fact. See Hickman, 695 N.W.2d at 369. Here, the extrinsic evidence conclusively establishes that 3M could unilaterally terminate the contract upon twelve months’ written notice if it exited the background music business. The 1995 agreement, and its termination provisions in particular, resulted from significant negotiations between the parties. Unlike the parties’ prior agreement signed in 1988, 3M included in its draft of the 1995 agreement a specific date by which the agreement would expire No. 05-4109 9 on its own terms. 3M’s draft also included a provision stating that it could terminate the agreement if it exited the business upon ninety days’ advance notice. These proposals worried Sound of Music, as it was concerned that 3M might leave the background music business (precisely what happened here). So Sound of Music asked that the provision allowing 3M to terminate the agreement by exiting the business be removed entirely, or at least that the agreement provide that sixty months’ notice was required to terminate the contract if 3M exited the business. 3M, however, would not agree. The 1995 agreement reflects that the parties ultimately agreed that 3M could terminate the agreement if 3M provided twelve months’ advance notice.