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Articles Posted in Commercial Litigation

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DSCF0815-300x225How do you know exactly what is included in your contract, and what is not? If your company enters into a contract to supply services, for example, the contract will include a provision for when and how you will be paid. What happens, though, if that provision, as it often does, includes a long list of terms, some very specific, some more general, and some catch-all?  How do you determine, pursuant to New York law, what will have to happen for you, or your business, to be paid?

As we recently discussed, it is important to know how to determine what your contract means, either before you sign it, so you can credibly try to avoid potential liability once the contract comes into existence; or, after the parties are bound and a dispute arises, so you can resolve it or perhaps limit your liability for it. One way to do that is to apply the rules of contract interpretation to the particular language of your contract.  In this article, we will examine how one such principle, ejusdem generis, is used to help determine exactly what a contract term means, or, even more likely, how a court will enforce it.

Ejusdem generis is a legal principle, which was defined, among other places, in 242-44 E. 77th St., LLC v. Greater New York Mut. Ins. Co., 31 A.D.3d 100, 103–04, 815 N.Y.S.2d 507, 510 (1st Dept. 2006):

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IMG_0912-225x300The rules of contract interpretation are best learned from seeing how they are applied.  To use them, successfully, is to know them.  In our last article, we discussed some of the basic rules.  We will now see how one of them, giving the words of the contract their plain and ordinary meaning, is applied by courts to common situations faced by New York businesses.

In Lake Const. & Dev. Corp. v. City of New York, 211 A.D.2d 514, 621 N.Y.S.2d 337 (1st Dept. 1995), a contractor sued the City of New York to be compensated for the additional work it said it performed to complete the brickwork on a public works construction project.  In preparing its winning bid, it had relied on the City Engineer’s cost estimate, which it said showed one brick wall of 972 square feet, rather than the two free-standing walls the contractor claimed were necessary to complete the job.  It obviously cost more to finish the job than the contractor estimated, so it tried to recoup at least some of its losses from the City.  Though that might seem like a reasonable approach for a business to take, it did not work.

The mere fact that the contractor claimed the contract was ambiguous did not make it so.  In upholding the lower court’s grant of summary judgement to the City dismissing the complaint, the First Department held that the relevant contract was clear and unambiguous that the contractor’s compensation was not based on the number of walls that needed to be constructed.  As the court noted, at Lake Const. & Dev. Corp. v. City of New York, supra, 211 A.D.2d 514, 515, 621 N.Y.S.2d 337, 338 (1st Dept. 1995), “the parties’ contract unambiguously provided that the quantity of brickwork to be paid for under the contract ‘shall be based on the number of square feet of free-standing brickwall installed in accordance with the plans and specifications and directions of the Engineer’.”

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DSCF0806-300x225What does your contract actually mean? You know what it says.  You know what you meant when you signed the contract and committed your business to it.  You thought it was clear and unambiguous.  What do you do when the other party claims you breached the contract and wants damages?  You know you fulfilled all your promises, duties, and obligations under the contract, and that the only way you breached it was if you promised something more, or different, than you thought you did.  So how, exactly, do you read a contract to determine what it means?

The rules of contract interpretation for contracts governed by New York law are fairly straight forward, even if the contract language they are used to decipher can appear to be opaque or misleading   For example, if the obligations of your New York business rested on the meaning of the phrase “face amount” as used in a commercial contract, with potential liability for hundreds of thousands of dollars of damages at stake, where would you start?

An interesting, if fairly old, case from the Appellate Division, First Department addressed that issue.  In Am. Exp. Bank Ltd. v. Uniroyal, Inc., 164 A.D.2d 275, 277, 562 N.Y.S.2d 613, 614–15 (1st Dept. 1990), the court set out the relevant rules for contract interpretation:

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https://www.newyorkbusinesslawyerblog.com/wp-content/uploads/sites/396/2018/05/Short.Beach_.Winter.Low_.Tide_-300x169.jpgSometimes something new is scary; something out of the ordinary gets you concerned. It might not be quite the same as you’ve run into before, or it might be something completely different. When you’re faced with something new, and you don’t know quite how to react, what would you do?

Would you find someone who’s faced the same type of problem before; someone who knows a little something about how to react; someone who can maybe come up with a game plan to solve your problem in the best way possible?

If you’re sick, you find a good doctor and maybe get a second opinion; if you need to wire a room to get light where no light has been before, you get a good electrician rather than run the risk of shocking yourself or burning down the house. If you’ve had an accident, you don’t go to a carpenter to fix your car, even if all you’re trying to do is put all of the pieces back together.

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FrozenHow can you prove something exists when it can’t be found?  If you ask an investigator, or a New York Litigator, it may not be as hard as you think.

There are always facts to ponder.  The other day I was listening to a podcast with an astrophysicist explaining Dark Matter.  It was more interesting than it might sound.

Dark Matter: things are supposed to work a certain way, interact with each other according to certain well-defined rules.  Think of Newton and the falling apple.  But what if they don’t?  What if the apple fell sideways, instead, as if something else is there, something you can’t see?  What if the only way to tell that it’s there is because it should be, but you just can’t detect it?  It would be something like looking at a dinner table with empty plates with crumbs, and pots and pans with scraps of food, but no one around. It just might have been a really good meal.