Principles of contract interpretation

Washington State Law – Principles of Contract Interpretation

Viking Bank v. Firgrove Commons 3, LLC, 2014 Wash. App. LEXIS 2277 (Division II, Wash. Ct. App.Sept. 16, 2014)

Decision: 140916-II-Viking-Bank-v-Firgrove

The court refused to imply a promise to pay management fees into the triple net provision of a commercial lease. These facts are unusual because standard commercial leases specifically list management fees in the description of costs passed on to tenants.

This case is useful for the following statement of the principles of contract interpretation applicable to Washington State:

“The primary objective in contract interpretation is to ascertain the mutual intent of the parties at the time they executed the contract. Int’l Marine Underwriters v. ABCD Marine, LLC, 179 Wn.2d 274, 282, 313 P.3d 395 (2013). Washington follows the “objective manifestation theory” of contract interpretation, under which the focus is on the reasonable meaning of the contract language to determine the parties’ intent. Hearst Commc’ns, Inc. v. Seattle Times Co., 154 Wn.2d 493, 503, 115 P.3d 262 (2005). “We generally give words in a contract their ordinary, usual, and popular meaning unless the entirety of the agreement clearly demonstrates a contrary intent.” Hearst, 154 Wn.2d at 504. And we view the contract as a whole, interpreting particular language in the context of other contract provisions. See Weyerhaeuser Co. v. Commercial Union Ins. Co., 142 Wn.2d 654, 669-70, 15 P.3d 115 (2000).

“To assist in determining the meaning of contract language, we also apply the “context rule” adopted in Berg, 115 Wn.2d at 666-69. This rule allows examination of the context surrounding a contract’s execution, including the consideration of extrinsic evidence to help understand the parties’ intent. Hearst, 154 Wn.2d at 502. However, extrinsic evidence is to be used “‘to determine the meaning of specific words and terms used’ and not to ‘show an intention independent of the instrument’ or to ‘vary, contradict or modify the written word.’” Hearst, 154 Wn.2d at 503 (emphasis in original) (quoting Hollis v. Garwall, Inc., 137 Wn.2d 683, 695-96, 974 P.2d 836 (1999)).

“If a contract provision’s meaning is uncertain or is subject to two or more reasonable interpretations after analyzing the language and considering extrinsic evidence (if appropriate), the provision is ambiguous. See Jensen v. Lake Jane Estates, 165 Wn. App. 100, 105, 267 P.3d 435 (2011). We generally construe ambiguities against the contract’s drafter. Pierce County v. State, 144 Wn. App. 783, 813, 185 P.3d 594 (2008); see also Johnny’s Seafood Co. v. City of Tacoma, 73 Wn. App. 415, 420, 869 P.2d 1097 (1994) (noting that ambiguities in lease drafted by a lessor are resolved in favor of the lessee). However, if the drafter is unknown or if the parties drafted the contract together, we will adopt the interpretation that is the most reasonable and just. See Berg, 115 Wn.2d at 672.”

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