Proving the Existence of a Contract
If the parties dispute whether a contract was formed, ordinarily testimony about the parties’ oral and written communications, and actions consistent or inconsistent with contract formation, would come into evidence. “Whether parties have reached a contractual agreement and on what terms are questions for the fact finder when conflicting versions of the parties’ negotiations require a determination of credibility.” Hebberd-Kulow Enterprises, Inc. v. Kelomar, Inc., 218 Cal.App.4th 272, 283 (2013). I represented a plaintiff which proved formation of an oral joint venture through oral testimony, follow up emails and a pre-dispute pattern of profit splitting.
Interpreting a Written Contract
If the parties executed a written contract, the outcome of a breach of contract claim may turn on how the writing would be interpreted or applied.
Interpretation of a contract is ordinarily a question of law for the court. Parsons v. Bristol Development Co. 62 Cal.2d 861, 865 (1965). I had a case where there was no extrinsic evidence bearing on interpretation of a critical clause, in which case the judge embodied her interpretation in a jury instruction.
However, if such interpretation turns on conflicting extrinsic evidence, this could go to the jury. City of Hope National Medical Center v. Genentech, Inc. 43 Cal.4th 375, 395 (2008). Questions concerning what the parties intended, what was discussed about the clause in question and how the parties performed should come into evidence. See CACI 314 (Interpretation – Disputed Words); 318 (Construction by Conduct). Under the “parol evidence” rule, evidence that helps supplement or explain an integrated agreement would be admissible, but evidence tending to add terms or contradict existing terms would not be admitted. EPA Real Estate Partnership v. Kang, 12 Cal.App.4th 171, 176-177 (1992).
If a contract has an “integration” clause, then evidence of negotiation or prior oral terms would not be admitted. Cal. Civ. Proc. Code § 1856(a). However, the parties may try to elicit evidence of consistent additional terms or course of dealing after execution of the agreement to explain an ambiguity. Id. §§ 1856(b),(c) (g).
If a contract has technical words, questions of a witness personally familiar with the field and how the term is used in practice should be admissible. CACI 316.
An arm’s length contract may have a clause that the contract would not be interpreted against either party as the drafter. However, if this clause is missing, or if the contract is one of adhesion – perhaps an insurance policy – testimony about which party drafted the contract could support a closing argument about interpretation against the drafting party. CACI 320.
The “Human Highlighter”
If I want the trier of fact to focus on a particular clause, I use a witness as a “human highlighter.” Inviting the witness to either look at the exhibit binder or on the flat screen if one is being used, I focus on the clause in question and either ask the witness to read the clause aloud or read it myself and ask if I read the clause correctly. If I want to highlight the absence of a word or term in the clause, I ask the witness whether s/he sees that term in the section in question and elicit a “no.” I have mostly been allowed to ask these questions, though in a recent bench trial the judge barred oral questions on writings in evidence that he could later read in full.
Common Errors
“The document speaks for itself” is a common objection, though it tracks no California or federal rule of evidence. The closest is the “best evidence” rule, Cal. Ev. Code § 1523, that oral testimony is not admissible to prove the contents of a writing. Yet, where the contents of a writing are proven by admission of the writing into evidence, the “human highlighter” questions are not intended to prove the contents of the writing but rather highlight key provisions. If overly long passages are read aloud or too many questions along this line are asked, the judge could say the testimony is cumulative or too time consuming and ask counsel to move on. Cal. Ev. Code § 352.
Business litigators should purge the “understanding” from their questions. Unless state of mind is an issue, which would not be the case with a contract claim, “what is your understanding of [Clause X]” either asks the witness to opine on Clause X’s meaning, or elicit a subjective reading, neither of which is admissible. Similarly inappropriate are questions overtly asking to assert a conclusion — what the contract means or how it should apply. “[E]vidence of the undisclosed subjective intent of the parties is irrelevant to determining the meaning of contractual language.” Winet v. Price, 4 Cal. App. 4th 1159, 1166, fn. 3 (1992); Cal. Ev. Code § 800 (non-retained opinion testimony).
Ask for Facts, not Conclusions
Business trial lawyers will do well to ask fact witnesses what was intended, what was said to the other side and how the parties performed after their writings, judiciously pausing over select key phrases to highlight their terms. These techniques should elicit useful and admissible oral testimony to help the trier of fact understand and apply the admitted writings.