Case Law Summaries

Schweizer v. Stepan Chemical Company

• Opinion Date: April 4, 2001
• Business Law
• E-Mail

CONTRACTS; INTERPRETATION—Although the formation and construction of a written contract are usually legal questions for the court, if there is uncertainty, ambiguity or the need for extrinsic evidence in aid of interpretation, then the areas of doubt should be left to a jury.

A property owner tendered a signed “Standard Performance Contract” to a contractor that was to perform demolition work for the owner. The owner and the contractor then signed it and returned it with a cover letter. The cover letter dealt with the hold harmless provision in the agreement and stated that “the language referring to ‘negligence or otherwise’ is considered by us not to mean injuries or damage caused solely by the negligence of the employees or officers of” the contractor or its subcontractors. Telephone discussions between the owner and the contractor ensued, but the contractor then sent another letter stating that the “hold harmless clause, as written, was unacceptable… .” Hearing nothing further, the contractor began its work. One of its employees was severely injured and sued the owner and several of the owner’s employees. The owner alleged a right to indemnification under the Standard Performance Contract, but the contractor argued that its objections to the hold harmless agreement contained in the correspondence constituted a rejection of that provision. The lower court construed the contractor’s letter to mean that the contractor agreed to indemnify the owner “for negligence claims arising out of the demolition work except for claims for which [the owner] was solely negligent.” The Appellate Division did not agree that the lower court could reach such a conclusion on summary judgment. In its mind, “[i]f parties agree on essential terms and manifest an intention to be bound by those terms, they have created an enforceable contract. But acceptance of an offer must be unequivocal and must comply exactly with requirements of the offer, and if it adds qualifications it is a rejection.” Here, the Appellate Division saw genuine issues of material fact as to whether the contractor and owner “mutually manifested assent to the indemnity clause in the contract.” To the Court, there were three possibilities: “[a]n agreement was formed with (a) no indemnity agreement by [the contractor]; (b) some indemnity obligation of [the contractor], but one less onerous than proposed by [the owner]; or (c) the indemnity obligation as proposed by [the owner].” Consequently, the Court reversed the summary judgment of the lower court, stating that “[a]lthough the formation and construction of a written contract are usually legal questions for the court, if there is uncertainty, ambiguity or the need for extrinsic evidence in aid of interpretation, then the areas of doubt should be left to the jury.”

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