Brinderson-Newberg Joint Venture v. Pacific Erectors, Inc

Brief Fact Summary.

Plaintiff, a general contractor, began working with Defendant, a subcontractor, to erect a Flue Gas System. The parties began negotiations to understand the terms of their agreement to construct the system. As the parties were negotiating the terms, the parties came to a disagreement about how Defendant would “erect complete” and “make a complete installation” of the FGS. Nevertheless, Defendant agreed with the explanation Plaintiff orally provided of the term. The oral explanation was never put in writing. Defendant began working on the agreement, but then stop, and declined to work on the entire agreement. Plaintiff brought suit.  The jury found for Defendant, and Plaintiff appealed.

Synopsis of Rule of Law.

If the extrinsic evidence a party is seeking to introduce into evidence is relevant to provide meaning to language in the contract, which the contract is reasonably susceptible to, the extrinsic evidence may be admitted into evidence.

Facts.

Plaintiff, Brinderson-Newberg Joint Venture, is a general contractor, and, Defendant, Pacific Erectors, Inc., is a subcontractor. Plaintiff was granted a contract to build a coal-fired power plant. Plaintiff began negotiations with Defendant to build the Flue Gas System (FGS), which would be part of the entire power plant project. Defendant proposed to build the support steel for FGS. Nevertheless, Plaintiff wanted Defendant to build all the essential steel for FGS and to construct the complete FGS component. At the third negotiations meeting, the parties conversed line by line about for the work that was to be performed under the contract. Plaintiff submitted a version of the contract, which stated that Defendant would “erect complete” and “make a complete installation” of the FGS. Defendant opposed this statement. Instead, Defendant contends he voiced his opposition with this requirement, however, Plaintiff, informed Defendant that the language could be viewed as solely requiring Defendant to build the support steel and compose picks and sets for the FGS. Defendant settled to this version of the terms, however, the language of the agreement did not change. Also, the agreement included a merger provision, which stated that the agreement was the final and complete writing between the parties. Defendant began to work on the agreement, however, he declined to compose the entire FGS. Plaintiff brought suit in against Defendant claiming breach of contract. At trial, Defendant was allowed to submit extrinsic evidence illustrating that the parties envisioned the meaning of the agreement to solely include the erection of support steel and picks and sets by Defendant. The jury ruled in favor of Defendant, and Plaintiff appealed.

Issue.

Whether extrinsic evidence that is relevant to provide meaning to language in the contract, which the contract is reasonably susceptible to, the extrinsic evidence may be admitted into evidence.

Held.

Yes, extrinsic evidence that is to provide meaning to language in the contract, which the contract is reasonably susceptible to, the extrinsic evidence may be admitted into evidence.

Discussion.

The contract between the parties is not reasonably susceptible to the meaning advanced by the extrinsic evidence offered by Defendant If the extrinsic evidence a party is seeking to introduce into evidence is relevant to provide meaning to language in the contract, which the contract is reasonably susceptible to, the extrinsic evidence may be admitted into evidence. This rule is an exception to the parole evidence rule, which forbids the introduction of extrinsic evidence to prove missing term to a written contract. Further, the exception allows extrinsic evidence used to clarify the meaning of express terms that appear ambiguous. When determining if the expressed, written terms are reasonably susceptible to the meaning present in the produced extrinsic evidence varies. The court must look at many factors, such as the ordinary or widely-accepted interpretation of the terms, or industry standards about the customary interpretation of the terms. Here, the definition of the terms “erect complete” and “make a complete installation” weigh on the standard interpretation of those terms, which are commonly recognized in the construction industry. The ordinary meaning in the construction industry of the terms “erect complete” and “make a complete installation” encompasses “field assembly, picking and setting, and bolting and welding the relevant components into permanent position.” Moreover, the ordinary meaning of these, even in the industry, is substantially wider than Defendant’s interpretation. Also, Defendant’s partial understanding of these terms is in direct contradiction to the thorough explanation of included work under a later provision in the contract. Further, in contract law, there is a generally accepted rule that provisions in a contract cannot contradict each other, rending another provision meaningless. Also, if there are any inconsistencies in a contract, between a general and specific provision, the specific provision controls. In this case, even if the terms “erect complete” and “make a complete installation” are unclear, the interpretation of these general clauses will be controlled by the specific clause which illustrates in detail the work Defendant is required to perform. Therefore, the language of the contract between the parties is not reasonably susceptible to the meaning advanced by Defendant, and the trial court’s ruling is reversed.