ConFold Pacific, Inc. v. Polaris Industries, Inc.

Brief Fact Summary.

Polaris hired ConFold to conduct a reverse logistics study analyzing the benefits of switching to returnable containers. Polaris and ConFold signed a mutual non-disclosure agreement. A few years later, Polaris came out with a returnable container produced by a third party. The design was very similar to a proposal submitted by ConFold. ConFold brought suit against Polaris in federal district court.

Synopsis of Rule of Law.

Unambiguous contractual language must be enforced as it is written.

Facts.

Polaris hired ConFold to conduct a reverse logistics study analyzing the benefits of switching to returnable containers. Polaris and ConFold signed a mutual non-disclosure agreement.ConFold completed the reverse logistics analysis pursuant to this agreement. Two months after the agreement was signed, Polaris requested proposals for designs for returnable containers. Polaris received nine proposals, including one design proposal from ConFold.A few years later, Polaris came out with a returnable container produced by a third party. The design was very similar to a proposal submitted by ConFold. ConFold brought suit against Polaris in federal district court.ConFold brought suit against Polaris in federal district court. The district court held Polaris did not breach a confidentiality agreement with ConFold, and ConFold appealed.

Issue.

Whether the original non-disclosure agreement applied to the design plans in the proposal.

Held.

The contract itself contains a statement that it represents the entire agreement between the two parties regarding the exchange of proprietary information “relating to the program.” The only “program” contemplated by the parties was the reverse logistics analysis. Finally, ConFold entered the agreement with Polaris for the express purpose of determining whether it would be beneficial for Polaris to begin using returnable containers. Providing consultancy for this purpose and actually designing the containers are two very different services. If ConFold wanted to design containers for Polaris in the future, it should have written this provision into the contract. No such provision exists, and all the extrinsic evidence offered in conjunction with the contract supports Polaris’ position that the confidentiality agreement was only intended to apply to the reverse logistics analysis. Even though there is minimal ambiguity in the contract, such ambiguity could only be resolved one possible way at trial. No trial on the meaning of the agreement is necessary. Yes. The mutual non-disclosure agreement between Confold and Polaris only required confidentiality regarding ConFold’s reverse logistics analysis, not ConFold’s design plan. The decision of the district court is reversed.

Discussion.

Unambiguous contractual language must be enforced as it is written. If contractual language is ambiguous, extrinsic evidence is admissible to explain or assist in interpreting the language. If ambiguity remains after admitting extrinsic evidence, the meaning of the contractual terms may be resolved at trial. When no ambiguity exists or when only minimal ambiguity exists such that a trial would lead to only one possible interpretation of the language, the meaning of the ambiguous contract is a question of law and not fact. The contract should be enforced as written. This rule is especially applicable to contracts made by commercially sophisticated parties. It is particularly useful when the party that drafted the contract later seeks to be relieved of the consequences of its failure to define its rights in the transaction. If a party desired to retain a particular right, it should spell it out in the contract.