§ 3. Evidence as to the terms of the Contract,

We now come to extrinsic evidence as affecting the terms Evidence

of a contract, and here the admissibility of such extrinsic ^ *° terms.

evidence is narrowed to a small compass : for * according to General

rule.

^34

INTERPBETATION OF CONTRACT?.

Part IV.

PerBiackburr.the general law of England the written record of a contract

T., in Burges v. ^ "

3 R & TW °^^s* ^^^ ^ varied, or added to by verbal evidence of what

was the intention of the parties.'

Exceptions. We find exceptions to this rule —

(a) in cases where one of the .parties gives a promise col-

lateral to the main agreement in consideration of the other

concluding that agreement ;

(6) in cases where explanation of the terms of the contract

is required.;

(c) in the introduction of usages into the contract ;

{d) in the application by equity of its j)eculiar remedies

in the case of mistake.

Collateral

terms.

.Erskine t.

Adeane,

L. R. 8 Ch.

at p. 7^

(a) Evidence may be given of a verbal agreement collateral

to the contract proved, and, in fact, making it subject to a

term unexpressed in its contents. Such a term however can

onlybe enforced if it be not contrary to the tenor of the written

agreement. Thus, where a farmer executed a lease upon the

promise of the lessor that the game upon the land should be

killed down, it was held that he was entitled to compensation

for damage done to his crops by a breach of such a verbal

promise though no reference to it e^ppeared in the terms of the

lease. Mellish, L. J., in giving judgment said, 'No doubt, as a

rule of law, if parties enter into negotiations affecting the terms

of a bargain, and afterwards reduce it into writing, verbal

evidence will not be admitted to introduce additional terms

into the agreement; but, nevertheless, what is called a

collateral agreement, where the parties have entered into an

agreement for a lease or for any other deed under seal, may

be made in consideration of one of the parties executing that

deed, unless, of course, the stipulation contradicts the terms

of the deed itself. I quite agree that an agreement of that

kind is to be rather closely watched, and that we should

not admit it without seeing clearly that it is substantially

proved.'

Chap. L $ 3. RULES BELA.TINa TO EVIDENCE. 235

(6) Explanation of terms may merely amount to evidence Explana-

of the identity of the parties to the contract, as where two ^^3 .

persons have the same name, or where an agent has contracted to identify

in his own name hut on the understanding that he does so as ^^^'

an agent. Or it may be a description of the subject-matter "h7&^n. 768.

of the contract, as in a case in which A agreed to buy of X ^^ subject-

, ^^ •' matter,

certain wool which was described as 'your wool,' and the

right of X to bring evidence as to the quality and quantity

of the wool was disputed. The Court held that it was

admissible, and Erie, J., thus stated the grounds of decision : —

' I am of opinion that the plaintiffs are entitled to succeed.

I assume that they must prove a written contract, and that

that contract must contain all the material terms. The con-

tract here is most explicit : it is to purchase of the plaintiffs

"your wool," at 16,?. a stone, to be delivered at Liverpocd.

The oral evidence is no doubt admissible to identify the sub-

ject-matter of the contract, and to sbow what " your wool "

really was. The judge, who has to construe the written

document, cannot have judicial knowledge of the subject- Macdonaidv.

^ , Lai^bottoin.

matter; and evidence has been invariably allowed to*^*E-977-

identify it.'

Explanation of terms may be an explanation of some word

not describing the subject-matter of the contract, but the

amount and character of the responsibility which one of the

parties takes upon himself as to the conditions of the contract.

Where a vessel is warranted 'seaworthy,* a house promised to show ap-

to be kept in ' tenantable' repair, a thing undertaken to be phrases.

done in a 'reasonable' manner, evidence is admissible to

show the application of these phrases to the subject-matter of

the contract, and so to ascertain the intention of the parties.

In Bwrgea v. Wickhcmi, a vesselvcalled the Ganges, intended 3 b. & s. 669.

for river navigation upon the Indus, was sent upon the ocean

voyage to India, having first been temporarily sti'engthened

so as to be fit to meet the perils of such a voyage. Her owner

insured her, and in every policy of marine insurance there is

2^6 INTERPRETATION OP CONTRACT. Part IV.

an implied warranty by the insured that the vessel is * sea-

worthy/ The GuDges was not seaworthy in the sense in

which that term would be ordinarily applied to an ocean-

going vessel, but her condition was made known to the

underwriters, and though her adventure was more dangerous

than an ordinary voyage to India, there appeared to be a

reasonable probability of its being brought to a safe ending.

At any rate, the ufhderwriters took the risk in full know-

ledge of the facts. The Ganges was lost, and the owner sued

the underwriters ; they defended the action on the ground

that the vessel was unseaworthy in the ordinary sense of the

word as applied to an ocean voyage, and maintained that

evidence could not be admitted to show that, with reference

to this particular vessel and voyage, the term was understood

in a modified sense. It was held that such evidence was

admissible. The grounds on which it was admissible are

stated by Blackburn, J., in a judgment which explains the

rule with the utmost clearness : —

' It is always permitted to give extrinsic evidence to apply

a written contract, and show what was the subject-matter to

which it refers. When the stipulations in the contract are

expressed in terms which are to be understood, as logicians

say, not simpliciter, sed aecundwn quid, the extent and the

obligation cast upon the party may vary greatly according to

what the parol evidence shows the subject-matter to be ; but

this does not contradict or vary the contract. For example,

in a demise of a house with a covenant to keep it in tenant-

able repair, it is legitimate to enquire whether the house be

an old one in St. Giles's or a new palace in Grosvenor-square,

for the purpose of ascertaining whether the tenant has com-

plied with his covenant, for that which would be repair in a

house of the one class is not so when applied to a house of

6M.&W.S4I. the other (see Payne v, Uaine). So, suppose a sale of a horse

warranted to go well in harness ; the qualities necessary to

constitute a good goer in harness would be different in a

Chap. I. § 3. BULES BELATINQ TO EVIDENCE, 2^7

pony fit to draw a lady's carriage or a dray-horse ; or in a

lease of Whiteacre for a year with an express contract to

cultivate it in a proper manner, the quantity of labour and

manure which the tenant would have to bestow must be

different according as Whiteacre consists of hop gardens or

meadows. In each of these cases you legitimately inquire

what is the subject-matter of the contract, and then the

terms of the stipulation are to be understood, not simpUciterf

but secundum quid. The two last instances I have supposed

are not, as far as I know, decided cases ; but I give them to

explain my meaning as examples of a general rule. Now,

according to the view already expressed, seaworthiness is a

term relative to the nature of the adventure, It is to be Ba»es t.

Wickharo,

understood, not simpliciter, but aecnndum quid! 3 b. & s. 699.

Cases of the sort we have just described are called cases of

latent ambiguity, and are sometimes distinguished from

patent ambiguities, where words are omitted, or contradict

one another; in such eases explanatory evidence in not admis-

sible. Thus, where a bill of exchange was drawn for ' two

hundred pounds' but the figures at the top were '245,' sandersonr.

evidence was not admitted to show that the biU was intended ^- ^- *'*

to be drawn for the larger amount.

(c) Evidence is admissible of the usage of a trade or a Evidence of

locality which may add a term to a contract, or may attach "^^®-

a special and sometimes non-natural meaning to one of its

terms. As an instance of a usage which annexes a term to a Usage to

contract we may cite the warranty of seaworthiness just men- ^^ ^^^^' '

tioned, which by custom is always taken to be included in the

contract of marine insurance, though not specially mentioned.

Similarly in the case of agricultural customs, a usage that

the tenant, quitting his farm at Candlemas or Christmas, was

entitled to reap the com sown the preceding autumn, was wunrieswonh

held to be annexed to his lease, although the lease was under xsin.L.c.'s9«.

seal, and was silent on the subject.

238 INTEBPBETATION OF CONTRACT. Part IV.

The principle on wbich such usages are annexed is stated

I M. & w. 4£6. by Parke, B., in HuUon v. Warren, to rest on the ' presump-

At p. 475. tion that in such transactions, the parties did not mean to

ment^of ii&. ©xprcss iu writing the whole of the contract by which they

^u[ll;^ttV!" intended to be bound, but to contract with reference to those

Robinson,

)a^xi?'^' kiiown usages.'

To explain The admissibility of evidence of usage to explain phrases

in contracts, whether commercial, agricultural, or otherwise

subject to known customs, might be exemplified by reference

to very numerous cases. The principle on which such ex-

planation is admitted has been stated to be, 'that words

perfectly unambiguous in their ordinary meaning are used

by the contractors in a different sense from that. In such

cases the evidence neither adds to, nor qualifies, nor contra*

diets the existing contract ; it only ascertains it by expound-

3^r&B.7.6. iiig the language.'

Thus in commercial contracts in the case of charter-parties

in which the days allowed for unloading the ship 'are to com-

Per cojc^ge, mcnce running " on arrival " at the ship's port of discharge,

dSSsS^ ^' evidence may be given to show what is commonly understood

L-. R I ^ P D

658. * ' ' ' to be the port. Some ports are of large area, and by custom

"arrival" is understood to mean arriving at a particular

spot in the port.'

In like manner a covenant by the lessee of a rabbit

wSSnT' warren that he would leave 10,000 rabbits on the warren

3 B. & Ad. 738. ^^g explained by evidence of a usage of the locality that 1 000

meant 1200.

Closely connected with the principle that usage may

explain phrases is the admissibility of skUled evidence to

""ifj.chT*' explain terms of art or technical phrases when used in

*^^' documents.

1? Meyer v.* ^" ^^ ordor to affect a contract a usage must be consistent

i6"?b.'n.s. with rules of law. *A universal usage cannot 'be set up

Conditions ^g*"^^^ *^® general law.' And it must also be consistent

"nder which with the terms of the contract, for it is optional to the

Chap. I. § 3. RULE8 RELATINa TO EVIDENCE. 239

partiBS to exclude the usage, if they think fit, and to frame usage

their contract so as to be repugnant to its operation. operates.

(d) In the admission of extrinsic evidence Equity goes Treatment

further than Common Law, and, from the various processes in equity.

by which it can deal with a contract, is enabled to admit

degrees of such evidence according to the circumstances of the

case, the negligence or the bad faith of the parties.

A offered to X several plots of land for a round sum ; Proved

immediately after he had despatched his offer he discovered ground for

that by a mistake in adding up the prices of the plots he had refusing

•^ o JT JT r specific per-

offered his land for a lower total sum than he intended. He formance.

informed X of the mistake without delay, but not before X

had concluded the contract by acceptance. Evidence was

admitted to show that A*9 offer was made by inadvertence,

and specific performance of the contract was refused. X was ^^^^ **

left to such remedy by way of damages as the Common Law ^ °**''' ^'

Courts might give him.

In this case evidence extrinsic to the contract was admitted

to show that one of the parties was disentitled, by the mistake

of the other, to specific performance. But where a parol

contract has been reduced to writing, or where a contract for

a lease or sale of lands has been performed by the execution

of a lease or conveyance. Equity will still admit evidence to

show that a term of the contract is not the real agreement

of the parties. And it will admit such evidence for two

purposes and under two sets of circumstances.

Where a contract has been reduced into writing, or a deed Rectifica-

executed, in pursuance of a previous agreement, and the documents,

writing or deed, owing to mutual mistake, fails to express

the intention of the parties. Equity will rectify the written

instrument in accordance with their true intent. This may be

done even though the parties can no longer be restored to the evi Beau-

champ V.

position which they occupied at the time when the contract H*L!'aVpfi|»

was made.

a40 INTERPRETATION OP CONTRACT. Part IV.

K^unyT. Should the original agreement be ambiguous in its terms,

"«*d3«>s extrinsic and, if necessary, parol evidence will be admitted to

ascertain the true intent of the parties.

L. R. 8 E<i. But there must haye been a genuine agreement {Mackenzie

V. Covlaon) : its terms must haye been expressed under

4 D. & J. >5o. mutual mistake {FeuHer r. Fowler) : and the oral evidence, if

tapSSkfS^ ^® ®"ly evidence, must be uncontradicted.

Correction Where mistake is not mutual, Equity will only admit

^)j^l3^^ extrinsic evidence in certain cases which appear to be re-

mutual, garded as having something of the character of Fraud, and

will admit it for the purpose of offering to the party seeking

to profit by the mistake an option of abiding by a corrected

contract or having the contract annulled.

»Be«T.44s- Instances of such cases are Garrard v, Frankd. cited

See I*, xaj.

above, or ff arris v. PeppereU, in which the mistake of the

one party was caused by the other^ though not with any

Hvm^ fraudulent intent, and known to him before his position had

u^llSn. been affected by the contract.

It would seem that, in such cases, Equity will not use

its corrective powers unless the parties can be placed in the

same position as if the contract had not been made.

36 & 37 Vict The Judicature Act reserves to the Chancery Division of

c 66>. 34.S.

the High Court a jurisdiction in ^aU causes for the rectifica-

tion or setting aside or cancellation of deeds or written

instruments.'

Chap. II. § I. BULE8 RELATING TO CONBTRIJCTION. 24I

CHAPTER n.

Bules relating to Construction.