Berke Moore Co. v. Phoenix Bridge Co.
98 N.H. 261, 98 A.2d 150, 1953 N.H. LEXIS 57 (1953)
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Rule of Law:
When contract language is ambiguous, a court may admit extrinsic evidence of the parties' conduct, negotiations, and the surrounding commercial context to determine the parties' mutual understanding of the term.
Facts:
- Phoenix Bridge Company held a general contract with the State of New Hampshire to construct a bridge.
- The plaintiff, a subcontractor, submitted a bid to Phoenix Bridge Company to furnish and install the concrete bridge deck (Item 15a) for $12.00 per square yard.
- The bid was based on state plans and specifications, which described the work as 'Item 15a Concrete in Bridge Deck' and provided an approximate quantity of 3,933 square yards.
- Phoenix Bridge Company accepted the bid, and the parties entered into a subcontract providing for payment based on 'the number of square yards of concrete surface included in the bridge deck'.
- After completing the work, a dispute arose over the meaning of 'concrete surface'.
- The plaintiff argued the term meant the total exterior surface area of the deck (top, bottom, and sides), totaling over 8,000 square yards.
- The defendant, successor to Phoenix Bridge Company, contended the term meant only the top surface area of the deck, which measured approximately 4,184 square yards, a figure close to the original estimate.
Procedural Posture:
- The plaintiff subcontractor filed a lawsuit against the defendant, the successor to the general contractor, in the trial court for breach of contract.
- The trial court found that the parties intended for payment to be based on the top surface of the bridge deck, an area of 4,184 square yards, and entered a verdict accordingly.
- The plaintiff excepted to the trial court's ruling and appealed, arguing the contract unambiguously entitled it to payment for the entire exterior surface.
- The defendant also brought exceptions, arguing that a determination by the State Highway Commissioner regarding the quantity was binding on the plaintiff.
- The case was heard by the New Hampshire Supreme Court on the parties' exceptions.
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Issue:
When a contract term is ambiguous, may a court consider extrinsic evidence, including the parties' conduct and the commercial context of their transaction, to determine the parties' mutual understanding of that term?
Opinions:
Majority - Duncan, J.
Yes. When contract language is ambiguous, a court's primary function is to determine the mutual intention of the parties, which may be ascertained through extrinsic evidence. The court found the term 'concrete surface included in the bridge deck' to be ambiguous because it could plausibly refer to either the top surface alone or the entire exterior surface. Therefore, the trial court properly admitted extrinsic evidence to determine the parties' mutual understanding. The evidence, including the original bid's estimated quantity of 3,933 square yards which closely matched the top surface area, supported the conclusion that both parties understood payment would be based on the top surface. The court inferred that Phoenix Bridge Company shared this understanding, as it would be commercially unreasonable for two experienced contractors to submit bids with nearly identical unit prices ($12.60 vs. $12.00) if one was bidding on a quantity twice as large as the other. The court affirmed the method of interpretation but remanded on the separate issue of how to calculate the surface area of the curbs, holding they should be measured as part of the top surface rather than being excluded.
Analysis:
This decision exemplifies a practical, context-driven approach to contract interpretation, moving beyond the 'four corners' of the document when ambiguity exists. It establishes that the primary goal is to enforce the parties' actual mutual understanding, rather than a rigid, literal interpretation of the text. The court's willingness to infer one party's intent from the other's based on commercial reasonableness and the similarity of bids is a significant analytical step. This precedent solidifies the principle that extrinsic evidence is crucial for resolving ambiguity and that courts will use real-world business logic to discern the true nature of an agreement.
