Frigaliment v BNS International PDF

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Frigaliment v. International Sales Corp. COURT AND DATE: US District Court, Southern District of New York (1960) PROCEDURAL HISTORY: ISSUE: If the parties to a contract subjectively, but in good faith, construe an ambiguous term differently, may courts look to external factors to determine the proper interpretation of the term? TRIGGER FACTS: Frigaliment Importing Co. (Frigaliment) (plaintiff), a Swiss company, offered to buy chicken for $0.33/lb. from B.N.S. International Sales Corp. (BNS) (defendant), an American corporation. The negotiations were primarily in German, but Frigaliment used the English word "chicken" to mean young chickens, instead of the German word "huhn," which includes stewing chickens (fowl). Frigaliment intended to purchase only young chickens suitable for broiling and frying (broilers). BNS, which was new to the trade, interpreted Frigaliment’s order for “chickens” as encompassing all types of chicken. The market rate for fowl at the time was $0.30/lb., while broilers were between $0.35 and $0.37/lb. Both the cablegrams exchanged by the parties and the contracts stated that the chicken was to be “Grade A, Government Inspected,” and the Department of Agriculture’s regulations were incorporated by reference. BNS shipped primarily fowl to Switzerland. After the first shipment, Frigaliment complained but allowed BNS to make the second shipment. After Frigaliment found fowl in the second shipment, Frigaliment sued BNS for breach of warranty, claiming that BNS delivered goods that did not meet the description in the contract. At trial, Frigaliment’s expert claimed that “chicken” meant broilers in the trade, but his testimony was undermined by the fact that his own contracts specifically requested "broilers" when he wanted younger birds or "fowl" when he wanted older birds. One of BNS’s suppliers argued that “chicken” did not include fowl, but admitted that it asked whether BNS wanted “fowl or frying chickens” when BNS asked for “chickens.” Frigaliment offered evidence that at least some suppliers and journals differentiate between “chickens” and “fowl.” Nevertheless, BNS’s experts testified that in the trade, the term “chicken” encompasses broilers and fowl. Further, BNS pointed out that the Department of Agriculture’s grading regulations include broilers and fowl in the definition of the term “chicken.” The United States District Court for the Southern District of New York considered the question.

PLAINTIFF’S MAIN ARGUMENTS: DEFENDANT’S MAIN ARGUMENTS: RULE (the law): If the parties to a contract subjectively, but in good faith, construe an ambiguous term differently, courts may look to external factors to determine the proper interpretation of the term.

HOLDING + REASONING: Yes. If the parties to a contract subjectively, but in good faith, construe an ambiguous term differently, courts may look to external factors to determine the proper interpretation of the term. To aid in the interpretation, courts may consider the plain meaning of the term, the negotiations between the parties, trade usage, other contract provisions, market factors, and the course of dealing between the parties. With respect to trade usage, when one party is not a member of the trade, the other party must show either (1) actual knowledge or (2) that the usage is so pervasive that the party’s acceptance of it may be presumed. In this case, the word “chicken” is ambiguous. The dictionary includes the definitions offered by both parties. A review of the negotiations does not provide a definitive answer as to the correct interpretation. BNS was new to the trade and had no actual knowledge of what Frigaliment argues is the trade usage of the term. Frigaliment has not shown that the usage of “chickens” to mean only broilers is sufficiently notorious and universal to presume BNS’s acceptance of it. Further, the contract specifically referenced the Department of Agriculture’s regulations, which define “chicken” as including fowl. BNS’s argument that it was impossible to obtain broilers for the price agreed in light of market rates was persuasive. Lastly, Frigaliment allowed the second shipment of chickens after receiving the first shipment that included fowl. Accordingly, BNS’s interpretation of the word chicken was consistent with “an objective meaning” of the word, and Frigaliment has not met its burden of persuading the court that its narrower interpretation should apply. Frigaliment’s complaint is dismissed....