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Vol. 2009-02 | February, 2009

Contract Interpretation

Construction contracts containing unclear or indefinite terms may be subject to legal scrutiny and interpretation, to resolve claims. One U.S. District Court opinion defined the reasoning applied to resolve conflicting claims: [ Page 764 ]

“If the written instrument is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and the court will construe the contract as a matter of law.” Coker, 650 S.W.2d at 393; see also Roman v. Roman, 193 S.W.3d 40, 50 (Tex.App.-Houston [1st Dist.] 2006, pet. denied) (citing DeWitt County Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 100 (Tex.1999)). “Whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered.” Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex.1996). “Terms are given `their plain, ordinary, and generally accepted meaning unless the instrument shows that the parties used them in a technical or different sense.'” Weingarten Realty Investors v. Albertson’s, Inc., 66 F.Supp.2d 825, 838 (S.D.Tex. 1999) (quoting Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996)). Applying that rule, “[a]n ambiguity exists only if the language is susceptible to two or more reasonable interpretations.” Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 157 (Tex.2003) (citing Kelley-Coppedge, Inc. v. Highlands Ins. Co., 980 S.W.2d 462, 465 (Tex.1998)). “A term is not ambiguous because of a simple lack of clarity.” DeWitt County Elec. Coop., 1 S.W.3d at 100 (citing Universal C.I.T. Credit, 243 S.W.2d at 157). “Nor does an ambiguity arise merely because parties to an agreement proffer different interpretations of a term.” Id. (citing Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex.1994)).

The parol evidence rule “precludes consideration of extrinsic evidence to contradict, vary[,] or add to the terms of an unambiguous written agreement absent fraud, accident[,] or mistake.” In re HE. Butt Grocery Co., 17 S.W.3d 360, 369 (Tex. App.-Houston [1.4th Dist.] 2000, writ denied). Thus, “only where a contract is first determined to be ambiguous may the court consider the parties’ interpretation and admit extraneous evidence to determine the true meaning of the instrument.” Nat’l Union Fire Ins. Co. v. CBI Indus., 907 S.W.2d 517, 520 (Tex.1995) (internal citations omitted); see also Jacobson v. DP Partners Ltd. P’ship, 245 S.W.3d 102, 106 (Tex.App.-Dallas 2008, no pet.) (“Parol evidence that varies or contradicts the express terms of the written agreement is not admissible.”). “Parol evidence is not admissible for the purpose of creating an ambiguity.” Id., see also Kelley-Coppedge, Inc., 980 S.W.2d at 464. In considering extraneous evidence, the court may properly consider “`the acts and conduct of the parties themselves, including acts done in the course of performance,'” as an indication of “`the construction that the parties themselves put on the contract. . . .'” Weingarten Realty Investors, 66 F.Supp.2d at 838 (quoting Ervay, Inc., 373 S.W.2d at 384); see also Texas v. Am. Tobacco Co., 463 F.3d 399, 404 n. 9 (5th Cir.2006); Eog Res. v. Hanson Prod. Co., 94 S.W.3d 697, 701 (Tex.App.-San Antonio 2002, no pet.); Trinity Universal Ins. Co. [ Page 765 ] v. Ponsford Bros., 423 S.W.2d 571, 575 (Tex.1968) (citing Lone Star Gas Co. v. Ray Gas Co., 139 Tex. 546, 164 S.W.2d 504 (1942)).

COACHMEN INSUSTRIES v. WILLIS OF ILLINOIS, INC., 565 F.Supp.2d 755 (S.D. Tex. 2008).

AUTHOR / EDITOR: J. NORMAN STARK is an Attorney-at-Law, a Registered Architect, (AIA, NCARB) Registered Landscape Architect, Interior Designer, Planner and Senior Appraiser (ASA), admitted to practice law before the Bar of Ohio, the US District Courts, Ohio and Illinois (Central Dist.), the US Court of Appeals, and the United States Supreme Court. He is a Mediator, Arbitrator and Litigator with experience in Business, Construction Law, and Public Works, and with additional experience in Real Estate, Construction Attorney (Legal Project and Crisis Management), and as an Expert Witness (Forensic Architect). His office is in Cleveland, Ohio.