The judicial vision of contract - the "constructed circle of assent" and printed terms.

• Author: Murray, John E., Jr.
• Position: Symposium on Contracts

The perennial dilemma of modern contract law is the effect to be accorded standardized terms, the printed "boilerplate" terms that appear in the overwhelming majority of contracts and are typically ignored. (1) The dilemma has been exacerbated by recent decisions addressing the operative effect of standardized terms that appear after the contract has been formed. The confusion emanating from such "terms-later" cases has made even the chronology of contract-making uncertain. (2)

A section of the Uniform Commercial Code was designed to determine whether standardized terms in only one party's form preclude the creation of a contract or should be included in the judicial construct that becomes the official "contract." (3) The section has never been effectively assimilated with traditional doctrines of contract law. While section 2-207 is hardly simple, criticisms of the statutory language fail to recognize that much of its tortured existence has been judicially manufactured. Courts have recognized that the purpose of section 2-207 was "to avoid the rigidity of common law theory of contracts that requires acceptance to be a mirror image of the offer" since such a concept was "outdated" and "tended to frustrate business purposes." (4) Yet,

the section resulting from so noble a purpose is uniformly misunderstood and criticized for its obscurity. Referred to as a "murky bit of prose," and "like the amphibious tank that was originally designed to fight in the swamps, but was ultimately sent to fight in the desert," [section] 2-207 is a defiant, lurking demon patiently waiting to condemn its interpreters to the depths of despair. (5) Like other significant changes in Article 2 contract law, section 2-207 was designed to produce an analysis in common law fashion, but the anticipated case law to elaborate its purpose and adumbrate its details did not evolve. The actual progeny became snarled in technical confusion that was diametrically opposed to the anti-technical philosophy of the Code. (6) It remains an outlier as the pervasive confusion surrounding it for more than six decades continues. Attempted legislative changes have failed and no such change is currently foreseeable. Only a new judicial vision of the purpose, interpretation, and application of this section can exorcize the "lurking demon."

A new vision requires a focused understanding of the section's underlying purpose and its comparison with the purpose of traditional contract doctrines that courts pursue in determining the existence of a contract and its terms. Because traditional contract doctrines are so well known, their underlying purpose is often ignored or misunderstood. It is important to begin with a review of that purpose.

CONTRACT: A CONSTRUCTED CIRCLE OF ASSENT USING TRADITIONAL DOCTRINES

While courts continue to insist that their paramount objective in resolving contract disputes is to carry out the intention of the parties, (7) it has long been an open secret that the search for the true intention of the parties is quixotic. Litigation to determine the existence and terms of any contract will produce a judicial construct recognized as the "contract" of the parties. The process begins with evidence of an alleged agreement that will be subjected to numerous judicial sieves to determine which manifestations of assent the court deems "operative." If a "contract" is discovered, it is a construct, a judicially conceived circle of assent, displaying what the court deems to be an objectively reasonable agreement between objectively reasonable parties colored by policy dimensions that reflect judicial favors and frowns. The distilled construct is the only agreement enforceable at law, regardless of the intention of the parties that will remain unknowable.

Official recognition that a contract has nothing to do with the intention of the parties is often explained by the obvious recognition that courts cannot read minds, (8) which prompted the early, but grudging recognition of the "objective" test that requires judges to focus on the parties' "objective manifestations." (9) This fundamental qualification, however, is rarely accompanied by an express recognition that inquiries into the meaning and effect of objective manifestations are conducted by judges with eclectic linguistic and experiential backgrounds that necessarily color their subjective lenses through which the evidence of agreement is examined and concluded. (10) Assertions of "reasonable" judicial interpretations and constructions contain a biting innuendo that "reasonable" is necessarily in the eye of the beholder. The interpretation of language to determine what it "is" cannot totally avoid the interpreter's view of what it "ought" to be. The fallacy of logical positivism is exposed in the fact that the "is" and the "ought" are not completely severable.

Beyond the well-known "objective" prerequisite, many other traditional judicial sieves share the same purpose of purifying the constructed operative agreement that will be christened the "contract." Absent a judicially determined ambiguity and plausible alternate objective manifestations, interpretation issues are determined by the court alone. These questions of "fact" become questions of "law." (11) Construction of the manifestations that courts deem operative is necessarily for the court alone. (12) However, the early sense of an ultimate construction may unwittingly color the judicial interpretation process.

Courts insist that the principal source of interpretation is found in the parties' language. (13) However, such rubric has too often induced a judge to conclude the language is so plain and clear on its face that it does not admit interpretation. Arthur Corbin's crushing response should have eliminated any such suggestion long ago. Such a judge "has of necessity already given the words an interpretation--the one that is to him plain and clear; and in making the statement[,] he is asserting that any different interpretation is 'perverted' and untrue." (14) The Corbin thrust, however, has not been totally successful. While there has been progress in thwarting the indefensible "plain meaning" mode of interpretation, its restatement is not uncommon. Even courts appearing to recognize its inherent contradiction continue to find it difficult to abandon, notwithstanding historic criticisms from judicial icons. (15)

Evidence extrinsic to the parties' contract language may be introduced in the interpretation process if the language is "ambiguous," but the court alone will determine ambiguity. (16) Contract language is not ambiguous "just because both parties say so, nor is a contract ambiguous simply because the parties offer different interpretations of its language ... [r]ather, whether a contract is ambiguous is, again, a question of law [,]" (17) i.e., only the court will decide the initial question of ambiguity which is, itself, an interpretation. The operative interpretation of the language that will be allowed to enter the constructed circle of assent may manifest the intention of the court rather than either of the parties who will be bound by the terms of the "contract" discovered by the court.

Even where the language of an agreement presents no troubling issue concerning its meaning, its interpretation may be subject to an overriding policy. Numerous illustrations include the general presumption that language is promissory rather than conditional since the characterization of language as creating a condition can cause a forfeiture which the law traditionally "abhors." A classic example occurs where a contract may appear to condition a payment by a general contractor to a subcontractor on the owner's payment to the contractor for work already performed by the subcontractor. Courts will strain to interpret language in such an agreement as merely stating a time for payment rather than transferring the risk of an owner's nonpayment to the subcontractor that would result in a forfeiture. (18) Karl Llewellyn would recognize this illustration of courts using "covert tools" to achieve a just result. (19)

The specific duties of each party under the contract will depend upon the court's interpretation. Having determined the duties, the court will then decide whether the contractual duties it has recognized have not been performed or sufficiently performed to constitute a breach. Whether the breach is "material," thereby discharging the other party from any further duty, or immaterial is, again, a judicial determination based on the court's view of the expectations of an objective reasonable party under all of the surrounding circumstances. (20)

Another generally accepted common law guide requires contract manifestations to be interpreted and construed in accordance with public policy as evidenced by statutes and regulations, (21) but the common law itself has its favors and frowns. Beyond strained interpretations to avoid forfeitures, the historically favorable view of charities illustrates a generous analysis concerning the enforceability of charitable subscription promises by discovering ways to validate such promises where traditional validation devices are not clear. (22) The generally accepted view that contract rights should be freely assignable leads to strict constructions of anti-assignment clauses, construing language as a mere promise not to assign that only creates a duty not to assign but does not preclude the power to assign. The assignment will be effective and the breach of the duty not to assign will typically produce nothing more than nominal damages. The policy of holding parties liable for negligent conduct makes indemnity provisions susceptible to strict constructions that will be unenforceable in some jurisdictions absent the use of certain "magic words." (23)

While "a poor bargain may not be made good by judicial construction or recasting of the contract," (24) courts will reallocate normal contractual...