Admissibility of testimony [parol evidence] regarding contract terms

  
When may a court consider parol evidence (testimony as to terms) when interpreting and enforcing a contract?
  
MERGER OR INTEGRATION CLAUSE generally bars parol evidence

Generally, a written instrument presumes that all prior agreements relating to the transaction have been merged into it and it will be enforced as written and cannot be added to, varied, or contradicted by parol testimony. See Baroid Equip., Inc. v. Odeco Drilling, Inc., 184 S.W.3d 1, 13 (Tex. App.—Houston [1st Dist.] 2005, pet. denied); Wilkins v. Bain, 615 S.W.2d 314, 315 (Tex. Civ. App.—Dallas 1981, no writ).

This rule is particularly applicable where the written contract contains a recital that it contains the entire agreement between the parties or a similarly worded merger provision. See Weinacht v. Phillips Coal Co., 673 S.W.2d 677, 679 (Tex. App.—Dallas 1984, no writ).

INCOMPLETE CONTRACT EXCEPTION

However, in case of an incomplete instrument, an exception to the parol evidence rule applies, even though fraud, accident, or mistake is not shown. Robertson, Inc. v. Webster, 679 S.W.2d 683, 688 (Tex. App.—Houston [1st Dist.] 1984, no writ) (concluding oral agreement regarding time of delivery of pickup truck to customer was not inconsistent with terms of agreement between car dealer and customer, for purposes of determining whether dealer's false representations regarding the delivery date were actionable under the Deceptive Trade Practices - Consumer Protection Act, notwithstanding the presence of a merger clause in the sales order form, where the instrument itself referred to"delivery" numerous times and yet contained no delivery date).

SOURCE: CORPUS CHRISTI / EDINBURG COURT OF APPEALS - 13-08-00263-CV - 10/20/11

ALSO RELEVANT: parol evidence rule, ambiguous vs. unambiguous contracts, definiteness of contractual terms

MSJ involving a contract: Unambiguous vs. ambiguous contracts

Whether enforcement of contract terms via summary judgment is appropriate depends on whether the contract is unambiguous or ambiguous, and whether consequently it can be construed as a matter of law.

PRINCIPLES OF CONTRACT INTERPRETATION: 

Contract construction as a question of law vs. resolution of fact issues with the aid of extrinsic evidence by the fact finder   

The interpretation of an unambiguous contract is a question of law, which we review de novo. See MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999). When the parties disagree over the meaning of an unambiguous contract, the court must determine the parties' intent by examining and considering the entire writing in an effort to give effect to the parties' intentions as expressed in the contract. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); Nicol v. Gonzales, 127 S.W.3d 390, 394 (Tex. App.-Dallas 2004, no pet.).

The parties' intent must be taken from the agreement itself, and the agreement must be enforced as written. Wells Fargo Bank, Minn., N.A. v. N. Cent. Plaza I, L.L.P., 194 S.W.3d 723, 726 (Tex. App.-Dallas 2006, pet. denied); Nicol, 127 S.W.3d at 394; see also Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (only where contract is first determined to be ambiguous may courts consider parties' interpretation or admit extraneous evidence to determine true meaning of instrument). Further, under the “Four Corners Rule,” the parties' intent must be “ascertained from the instrument as a whole and not from isolated parts thereof.” Calpine Producer Servs., L.P. v. Wiser Oil Co., 169 S.W.3d 783, 787 (Tex. App.-Dallas 2005, no pet.).

All writings that pertain to the same transaction will be considered together, even if they were executed at different times. DeWitt Cnty. Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999). Unless the agreement shows that the parties used a term in a technical or different sense, we give the terms their plain, ordinary, and generally accepted meaning. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). “Courts will not declare a forfeiture unless they are compelled to do so by language which can be construed in no other way.” Reilly v. Rangers Mgmt., Inc., 727 S.W.2d 527, 530 (Tex. 1987).

When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue. See Harris v. Rowe, 593 S.W.2d 303, 306 (Tex. 1979). If a written instrument is so worded that it can be given “a certain or definite legal meaning or interpretation,” then it is not ambiguous. Coker, 650 S.W.2d at 394. “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. Villalba, 324 S.W.3d 634, 640 (Tex. App.-Dallas 2010, no pet.); accord Seagull Energy E & P, Inc. v. Eland Energy, Inc., 207 S.W.3d 342, 345 (Tex. 2006). A disagreement over the meaning of a contract provision does not render the provision ambiguous. See Nicol, 127 S.W.3d at 394. The question of whether a contract is ambiguous is a question of law, which is reviewed de novo. See MCI Telecomms. Corp., 995 S.W.2d at 650.

SOURCE: Dallas Court of Appeals - 05-09-00962-CV - 8/2/11

An appellate court reviews a trial court’s construction of an unambiguous contract de novo. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650 (Tex. 1999). In performing a de novo review, we exercise our own judgment and redetermine each legal issue. Quick v. City of Austin, 7 S.W.3d 109, 116 (Tex. 1999). When construing a written contract, courts ascertain the intent of the parties as expressed in the instrument. Nat’l Union Fire Ins. Co. of Pittsburgh, Pa. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995). Courts examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). If there is no ambiguity in the instrument, its construction is a question of law for the court. See id. Interpretation of a contract becomes a fact issue, to be resolved by extrinsic evidence, only when application of pertinent rules of construction leaves a genuine uncertainty as to which of two meanings is proper. Id. at 393-94.

SOURCE: Tyler Court of Appeals - 12-10-00342-CV - 7/29/11

Interpreting the fine print: Is the contractual language clear or ambiguous?

How do Texas courts deal with the contention that a contract is ambiguous? 

Whether a contract is ambiguous is a question of law. Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). If the contract is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and a court should construe the contract as a matter of law. SAS Institute, Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005); ACS Investors, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997). [ The court construes ] an unambiguous contract according to the plain meaning of its express wording. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex. 1985). Unambiguous contracts are enforced as written. Heritage Resources, Inc., 939 S.W.2d at 121.
 
WHAT MAKES A CONTRACT AMBIGUOUS?

 “A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation.” Id. However, a contract is ambiguous when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Nevarez v. Ehrlich, 296 S.W.3d 738, 742 (Tex.App.--El Paso 2009, no pet.). Not every difference in the interpretation of a contract amounts to an ambiguity. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994). Mere disagreement over the meaning of a provision in the contract does not make the terms ambiguous. Richardson Lifestyle Association v. Houston, 853 S.W.2d 796, 800 (Tex.App.--Dallas 1993, writ denied).

Likewise, uncertainty or lack of clarity in the language chosen by the parties is insufficient to render a contract ambiguous. Preston Ridge Fin. Servs. Corp. v. Tyler, 796 S.W.2d 772, 777 (Tex.App.--Dallas 1990, writ denied). Whether a contract is ambiguous is a question of law for the court to 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).
 
When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue. Id. We determine whether a contract is ambiguous by looking at the contract as a whole in light of the circumstances present when the parties entered the contract. Universal Health Servs., Inc. v. Renaissance Women’s Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003). If a contract is determined to be ambiguous, then a court may consider extraneous evidence to ascertain the true meaning of the instrument. Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995).
 
TWO CATEGORIES OF CONTRACT AMBIGUITY

An ambiguity may be either patent or latent. Id. A patent ambiguity is evident on the face of the contract. Id. A latent ambiguity arises when a contract that is unambiguous on its face is applied to the subject matter with which it deals and an ambiguity appears by reason of some collateral matter. Id. When a contract contains an ambiguity, either patent or latent, the interpretation of the instrument becomes a fact issue. Coker, 650 S.W.2d at 394; Quality Infusion Care, Inc. v. Health Care Service Corp., 224 S.W.3d 369, 379 (Tex.App.--Houston [1st Dist.] 2006, no pet.). The trier of fact [ jury or judge in bench trial ] must resolve the ambiguity by determining the true intent of the parties. Coker, 650 S.W.2d at 394-95.
 
SOURCE: El Paso Court of Appeals - 08-08-00343-CV - 4/20/11

Unambiguous Contract enforced as written

CONTRACT CONSTRUCTION PRINCIPLES: AMBIGUOUS VS. UNAMBIGUOUS CONTRACT LANGUAGE
 
Unambiguous Contract given effect & enforced as written: as a matter of law 

The interpretation of an unambiguous contract is a question of law for the court. MCI Telecomms. Corp. v. Tex. Utils. Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999). The court's primary concern in interpreting a written contract is to determine the mutual intent of the parties as manifested in the contract. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). The parties' intent must be taken from the agreement, and the agreement must be enforced as written. Wells Fargo Bank, Minn., N.A. v. N. Cent. Plaza I, L.L.P., 194 S.W.3d 723, 726 (Tex. App.-Dallas 2006, pet. denied). We favor an interpretation that affords some consequences to each part of the agreement so that none of the provisions will be rendered meaningless. Coker, 650 S.W.2d at 394. Unless the agreement shows that the parties used a term in a technical or different sense, we give the terms their plain, ordinary, and generally accepted meaning. Heritage Res., Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). Under generally accepted principles of contract interpretation, all writings that pertain to the same transaction will be considered together, even if they were executed at different times and do not expressly refer to one another. DeWitt Cnty. Elec. Co-op., Inc. v. Parks, 1 S.W.3d 96, 102 (Tex. 1999). This rule, however, is a device for ascertaining and giving effect to the intention of the parties and cannot be applied arbitrarily. Id. 
 
SOURCE: Dallas Court of Appeals - 05-09-00586-CV - 5/18/11

May Parol Evidence be considered in interpreting a contract?

CONTRACT CONSTRUCTION AND THE PAROL EVIDENCE RULE When is parol evidence [verbal, oral, affidavit testimony] proper in contract construction? The construction of an unambiguous contract is a question of law for the court to determine. MCI Telecomms. Corp. v. Tex. Util. Elec. Co., 995 S.W.2d 647, 650 (Tex. 1999). An unambiguous contract will be enforced as written, and parol evidence will not be received for the purpose of creating an ambiguity or to give the contract a meaning different from that which its language imports. David J. Sacks, P.C. v. Haden, 266 S.W.3d 447, 450 (Tex. 2008) (citing Universal C.I.T. Credit Corp. v. Daniel, 243 S.W.2d 154, 157 (Tex. 1951)). What is the role of extraneous evidence (outside the four corners of the contract)? Only where a contract is ambiguous may a court consider the parties’ interpretation and admit extraneous evidence to determine the true meaning of the instrument. Haden, 266 S.W.3d at 450 (citing Nat'l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995)). SOURCE: Houston Court of Appeals - 01-09-00856-CV – 5/19/11 RELATED TERMS AND PHRASES: contract interpretation, construction, enforcement - parol [ not parole ] evidence rule - not the best evidence objection - explaining what the contract language means

What makes a contract ambiguous?

AMBIGUOUS VS. UNAMBIGUOUS CONTRACTS IN TEXAS 

A contract is ambiguous if its meaning is uncertain or it is reasonably susceptible to more than one meaning. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983); In re Marriage of Iberti, 64 Cal. Rptr. 2d 766, 769 (Cal. Ct. App. 1997) (“A term of the agreement is ambiguous if it is susceptible of more than one reasonable interpretation.”). An unambiguous contract will be enforced as written according to the plain meaning of the words used and “regardless of whether one or more of the parties contracted wisely or foolishly, or created a hardship for himself.” Wooten Props., Inc. v. Smith, 368 S.W.2d 707, 708-09 (Tex. Civ. App.-El Paso 1963, writ ref'd). Courts are not authorized to rewrite agreements by inserting additional terms, definitions, or provisions that the parties could have included themselves but did not, or by implying terms for which the parties have not bargained. Tenneco, Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 646 (Tex. 1996). In other words, courts cannot make contracts for the parties. HECI Exploration Co. v. Neel, 982 S.W.2d 881, 888 (Tex. 1998).
 
SOURCE: Dallas Court of Appeals 05-06-00966-CV 5/10/11

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

Ambiguous vs. Unambiguous Contract: Implications for Summary Judgment, Admissibility of Extrinsic, Parol Evidence

WHEN IS A CONTRACT AMBIGUOUS / UNAMBIGUOUS? A contract is unambiguous if it can be given a definite legal meaning; if it is subject to two or more reasonable interpretations, it is ambiguous, creating a fact issue on the parties' intent. Webster, 128 S.W.3d at 229; Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000). Lack of clarity, however, does not necessarily create an ambiguity, and neither does a mere disagreement between the parties. See Universal Health Servs., Inc. v. Renaissance Women's Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003) (adding that whether "a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered"); see also City of The Colony v. N. Tex. Mun. Water Dist., 272 S.W.3d 699, 722 (Tex. App.- Fort Worth 2008, pet. filed) (explaining that when "the meaning of a contract is unambiguous, a party's construction is immaterial"). Question of Law vs. Question of Fact When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983). Conversely, the interpretation of an unambiguous contract is a matter of law to be determined by the trial court. Gulf Ins. Co. v. Burns Motors, Inc., 22 S.W.3d 417, 423 (Tex. 2000). Effect of Contract Ambiguity (or Absence thereof) on Admissibility of Extrinsic Evidence / Parol Evidence In its second issue, Vineyard argues that the trial court erred by sustaining Univest's general objection to the purported parol evidence testimony of Collins and by excluding portions of Collins's affidavit because Collins's testimony met the admissibility requirements under the rules of evidence and common law. However, because we have concluded that the terms in the REA are not ambiguous, we must overrule Vineyard's evidentiary issues. See Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex. 2006) (recognizing that if the agreement is not ambiguous, courts do not consider extrinsic evidence when interpreting the agreement). Accordingly, we overrule Vineyard's second issue. SOURCE: 02-08-00496-CV (10/1/09) (Fort Worth Court of Appeals)

Contract Ambiguity as a defensive claim

AMBIGUOUS CONTRACT ARGUMENT [Claim that contract sued on is ambiguous as a defense to enforcement of the contract as a matter of law without parol evidence] “Whether a contract is ambiguous is a question of law that must be decided by examining the contract as a whole in light of the circumstances present when the contract was entered.” Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex. 1996). Only where a contract is ambiguous may a court consider the parties’ interpretation and “admit extraneous evidence to determine the true meaning of the instrument.” Nat’l Union Fire Ins. Co. of Pittsburgh, Penn. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (per curiam). When is a contract provision ambiguous, and when not? A contract is not ambiguous merely because the parties have conflicting interpretations of the contract. Columbia Gas, 940 S.W.2d at 589. A contract is ambiguous only when its meaning is uncertain or it is reasonably susceptible to more than one meaning. Coker v. Coker, 650 S.W.2d 391, 393 (Tex. 1983). Question of law vs. question of fact precluding summary judgment When a contract is not ambiguous, the construction of the written instrument is a question of law for the court that is reviewed de novo. MCI Telecommunications Corp. v. Texas Utilities Elec. Co., 995 S.W.2d 647, 650-51 (Tex. 1999); Coker, 650 S.W.2d at 393. SOURCE: 04-08-00745-CV (9/9/09) (San Antonio Court of Appeals)