Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Wednesday, May 4, 2011

Contract construction: Lack of ambiguity precludes use of parol evidence to explain "what contract really meant"

CONTRACT CONSTRUCTION -- PRINCIPLES OF INTERPRETATION

Ambiguity of contract or otherwise determined as a question of law

The construction and meaning of an unambiguous contract is a question of law. Calpine Producer Servs., L.P. v. Wiser Oil Co., 169 S.W.3d 783, 787 (Tex. App.-Dallas 2005, no pet.). The question of whether a contract is ambiguous is also a question of law, which the court must decide “by looking at the contract as a whole in light of the circumstances present when the contract was entered.” Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). “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 . . . .” Id. at 393.

When is a contract (not) ambiguous?

“A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation.” Las Colinas Obstetrics-Gynecology- Infertility Ass'n, P.A. v. Villalbe, 324 S.W.3d 634, 640 (Tex. App.-Dallas 2010, no pet.). “An ambiguity does not arise simply because the parties advance conflicting interpretations of the contract.” Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). “For an ambiguity to exist, both interpretations must be reasonable.Id. (emphasis original).

Intent of contracting parties – How is it determined?

“In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument.” Coker, 650 S.W.2d at 393. “The court should consider that the 'intent of the parties must be taken from the agreement itself, not from the parties' present interpretation, and the agreement must be enforced as written.'” Calpine Producer Serv., 169 S.W.3d at 787 (quoting Parts Indus. Corp. v. A.V.A. Servs., Inc., 104 S.W.3d 671, 678 (Tex. App.-Corpus Christi 2003, no pet.). Under the “Four Corners Rule,” the parties intent must “be ascertained from the instrument as a whole and not from isolated parts thereof.” Id. “[C]ourts should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none with be rendered meaningless.” Coker, 650 S.W.2d at 393 (emphasis original).

No testimony to be permitted regarding contract’s meaning when it is unambiguous

Furthermore, “[w]hen the contract is unambiguous, the court should apply the pertinent rules of construction, [and] apply the plain meaning of the contract language . . . .” Calpine Producer Servs., 169 S.W.3d at 787. We do not consider parol evidence when reviewing unambiguous contracts. See Stewman Ranch, Inc. v. Double M. Ranch, Ltd., 192 S.W.3d 808, 810 (Tex. App.-Eastland 2006, pet. denied) (citing Middleton v. Broussard, 504 S.W.2d 839 (Tex. 1974)).

SOURCE: Dallas Court of Appeals - 05-09-01472-CV - 5/2/11

LEGAL TERMS: ambiguous vs. unambiguous contract, contract construction and enforcement, parol [not parole] evidence rule

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