Interform Co. v. Mitchell
575 F.2d 1270 (1978)
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Rule of Law:
When determining the terms of an agreement, a court may consider extrinsic evidence, such as prior negotiations, subsequent conduct, and trade usage, to ascertain the parties' true intent, especially when their written documents were not intended to be the final and exclusive expression of their agreement.
Facts:
- In the spring and summer of 1971, Mitchell Construction Company (Mitchell) and Interform Company (Interform) engaged in preliminary negotiations focused exclusively on the rental of concrete forms.
- On September 8, 1971, Mitchell's president expressed interest in purchasing the forms to an Interform salesman, who was surprised by the suggestion.
- A telephone conversation occurred on September 13 between the presidents of Mitchell and Interform, which Interform contended resulted in a rental agreement.
- Between September 13 and 17, Mitchell sent Interform a document titled 'Purchase Order' for the forms, which was backdated to September 8.
- Interform sent a confirmation on a similar purchase order form, but subsequently sent three bills of lading and three invoices, each of which specifically referred to the transaction as a 'rental' of the forms.
- Mitchell paid Interform $32,000 for the use of the forms on a first construction job.
- After the first job was complete, Mitchell retained the forms and used them on a second construction job without a new agreement or additional payment to Interform.
Procedural Posture:
- Interform Company sued Mitchell Construction Company in the United States District Court for the District of Idaho.
- Interform sought rental payments for the use of its concrete forms on a second job and the return of the forms.
- Mitchell filed a counterclaim, asserting that it had purchased the forms and sought a declaratory judgment of ownership.
- Following a bench trial, the district court found that the agreement was a rental, not a sale, and that Mitchell had been unjustly enriched by using the forms on the second job.
- The district court awarded Interform $26,750 in damages but denied its request for attorney's fees.
- Mitchell Construction Company, as appellant, appealed the judgment to the United States Court of Appeals for the Ninth Circuit.
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Issue:
Under Idaho law, may a court consider extrinsic evidence to determine that an agreement was a rental rather than a sale, despite the use of 'Purchase Order' forms, where the evidence suggests the forms were not intended as a final, integrated expression of the parties' agreement?
Opinions:
Majority - Sneed, J.
Yes. A court may look beyond the written documents to find the parties' true intent when those writings are not a final, integrated agreement. The court embraced the Corbin view of contract interpretation, which prioritizes the actual intent of the parties over the rigid, formalistic reading of a document. Under this approach, which is consistent with Idaho's version of the Uniform Commercial Code (§ 28-2-202), the court found that the 'Purchase Order' forms were not intended by the parties as the final expression of their agreement. The trial court correctly considered extrinsic evidence, including the initial rental-only negotiations, the subsequent invoices and bills of lading explicitly stating 'rental,' and the evidence of trade custom where purchase orders are used for rentals. This evidence overwhelmingly supported the conclusion that the agreement was a rental for the first job. For the second job, because there was no express contract, Mitchell's unauthorized use of the forms constituted unjust enrichment, and Interform was entitled to recover the fair rental value under a theory of quantum meruit.
Analysis:
This case exemplifies the modern judicial shift from the rigid, 'four-corners' Williston approach to contract interpretation toward the more flexible, intent-focused Corbin approach. The decision solidifies that the parol evidence rule does not bar extrinsic evidence when the court first determines that a writing was not intended as a complete and final integration of the agreement. By allowing courts to look at all surrounding circumstances, including negotiations and subsequent party conduct, this ruling provides a pathway to enforce the parties' actual bargain, even if their paperwork is ambiguous or incomplete. This approach reduces the risk that a party can use a boilerplate form like a 'purchase order' to mischaracterize the true nature of a deal, but it also potentially reduces the certainty that parties can achieve through written instruments alone.
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