Ragus Co. v. City of Chicago
257 Ill. App. 3d 308, 195 Ill. Dec. 535, 628 N.E.2d 999 (1993)
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Rule of Law:
When a term in a contract for the sale of goods is ambiguous, a court may consider evidence of usage of trade to interpret the term and determine the parties' contractual obligations.
Facts:
- In July 1991, the City of Chicago (City) sought bids for a contract to supply rodent traps, specifying quantities such as '150 cases of 5-V2” x 11”; 24/case'.
- Ragus Company (Ragus) submitted a bid, and the City awarded it the contract on August 18, 1991.
- In early October 1991, Ragus attempted to deliver the traps, interpreting '24/case' to mean 24 individual traps per case.
- The City refused the delivery, contending that based on industry practice, the term '24/case' meant 24 pairs of traps, thus expecting double the quantity Ragus delivered.
- On October 16, 1991, the City gave Ragus ten days to deliver the additional traps to cure the perceived defect in performance.
- Ragus refused to tender the additional traps, maintaining that its initial delivery complied with the contract terms.
- On November 7, 1991, the City suspended Ragus from its bidding process for six months due to the dispute.
Procedural Posture:
- Ragus Company filed a five-count complaint against the City of Chicago and three of its employees in the trial court.
- The defendants filed a motion to dismiss the complaint pursuant to section 2-619(a)(9) of the Illinois Code of Civil Procedure, submitting affidavits to support their interpretation of the contract based on usage of trade.
- The trial court, after a hearing, construed the contract in favor of the defendants and dismissed Count I (contract interpretation) and Count V (money damages) with prejudice.
- Ragus Company (appellant) appealed the trial court's dismissal of Counts I and V to the Illinois Appellate Court, where the City of Chicago (appellee) was the responding party.
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Issue:
Does evidence of usage of trade properly resolve an ambiguity in a contract for the sale of goods regarding the quantity of items to be delivered?
Opinions:
Majority - Justice Rizzi
Yes, evidence of usage of trade is a proper tool for interpreting an ambiguous contract term concerning quantity. The contract term '24/case' was ambiguous because it did not exclude the reasonable interpretation that it referred to 24 pairs of traps. Under the Uniform Commercial Code, it is proper to reference usage of trade to resolve such an ambiguity. The City presented uncontroverted affidavits from the trap manufacturer, a City purchasing agent, and another employee, which collectively established that these specific traps are exclusively packaged, sold, and purchased in pairs throughout the industry. Ragus failed to present any evidence to rebut this established trade usage. Therefore, the court had sufficient evidence to conclude that '24/case' meant 24 pairs per case, and the trial court properly interpreted the contract in favor of the City.
Analysis:
This case serves as a clear application of the Uniform Commercial Code's (UCC) rules on contract interpretation, particularly the use of extrinsic evidence like trade usage. It underscores that even seemingly straightforward terms can be deemed ambiguous if they are subject to a different, reasonable interpretation within a specific industry context. The decision reinforces the principle that a party's failure to rebut evidence of an established trade usage can be determinative, as the uncontroverted evidence will be accepted as fact. This ruling advises commercial actors to either be intimately familiar with the customs of their trade or to draft contracts with extreme specificity to avoid disputes over interpretation.
