Brief Fact Summary. The parties were involved in a contractor / subcontractor relationship. The parties agreed to grant one another mutual releases from their responsibilities under an agreement. At issue was the scope of these releases.
Synopsis of Rule of Law. The scope of an agreement to mutually rescind a contract can only be determined after "interpretation of the terms of the agreement of rescission (or cancellation), and in the light of the circumstances that surrounded its making."
In the interpretation of a contract the findings of the trial court based upon evidence of the surrounding circumstances are findings of fact which are binding in this court if supported by the evidence.View Full Point of Law
Issue. Is parol evidence admissible when determining the scope of an agreement to mutually rescind a contract?
Held. Yes. The scope can only be determined after "interpretation of the terms of the agreement of rescission (or cancellation), and in the light of the circumstances that surrounded its making." The court stressed the importance of establishing the parties' intention, but indicated that based on the facts before the court that was very difficult. The parties' use of the term "without prejudice" complicates the situation because it "served to heighten the ambiguity". As such, the circumstances surrounding the agreement had to be analyzed. The court agreed with the lower court's finding that based on the circumstances the Defendant was not liable for the cost of completing the project, because of the Plaintiff's hesitance to hurt the Defendant's standing in the business world.
Discussion. This case provides an interesting discussion of the issues surrounding parties' agreements to release one another from contractual obligations.