Hurst v. W.J. Lake & Co.
16 P.2d 627 (1932) (1932)
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Rule of Law:
Evidence of trade usage is admissible to define the meaning of terms in a contract, even if those terms are not ambiguous on their face, when the parties are members of that trade.
Facts:
- On March 20, 1930, Roscoe P. Hurst entered into a written contract to sell 350 tons of horse meat scraps to W. J. Lake & Co., Inc.
- Both Hurst and W. J. Lake & Co. were experienced dealers in the horse meat scrap trade.
- The contract set a price of $50.00 per ton for scraps with a 'Minimum 50% protein' content.
- A supplementary agreement stipulated that for scraps analyzing 'less than 50% of protein,' the buyer would receive a discount of $5.00 per ton.
- Hurst delivered 140 tons of scraps that had a protein content between 49.53% and 49.96%.
- W. J. Lake & Co. paid the discounted price of $45 per ton for this shipment, treating it as 'less than 50% protein.'
- Hurst alleged that a well-known custom in the trade understood 'minimum 50% protein' to include any product with 49.5% protein or more.
Procedural Posture:
- Roscoe P. Hurst (plaintiff) filed a complaint against W. J. Lake & Co., Inc. (defendant) in the circuit court, a trial-level court.
- The defendant moved for judgment on the pleadings, arguing that the contract's plain language was controlling, regardless of any alleged trade custom.
- The circuit court sustained the defendant's motion, entering a judgment in favor of W. J. Lake & Co., Inc.
- Hurst, as the appellant, appealed the judgment to the Supreme Court of Oregon.
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Issue:
Does evidence of a trade usage or custom, which gives a special meaning to contract terms, become inadmissible if the contract language itself appears plain and unambiguous?
Opinions:
Majority - Rossman, J.
No, evidence of trade usage is admissible to show the special meaning of terms even if the contract appears unambiguous. The court rejects the traditional, rigid rule that plain language cannot be challenged by extrinsic evidence. Words do not have a single, fixed meaning; they derive significance from their context, including trade customs. To properly interpret a contract, a court must not only place itself in the parties' shoes but also 'adopt their vernacular.' The court cited an Oregon statute allowing evidence that terms have a 'technical, local, or otherwise peculiar signification.' It reasoned that when tradesmen use trade terms in a contract, they are presumed to have attached the trade significance to them unless they expressly state otherwise.
Analysis:
This decision represents a significant departure from the classical 'plain meaning' rule of contract interpretation, which holds that courts should not look beyond the 'four corners' of a document if its language is clear. By allowing evidence of trade usage to interpret seemingly unambiguous terms, the court embraced a more modern, contextual approach. This aligns with the principles later codified in the Uniform Commercial Code (UCC § 1-303), which recognizes course of performance, course of dealing, and usage of trade as essential tools for interpreting commercial agreements. The case establishes that the goal of contract interpretation is to ascertain the parties' actual intent, which may be reflected in the specialized language of their industry.
