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United States Naval Inst. v. Charter Commc'ns, Inc. - 875 F.2d 1044 (2d Cir. 1989)

Rule:

In determining the meaning of an ambiguous contract term, the finder of fact seeks to fathom the parties' intent. That intent may be proven by extrinsic evidence, evidence of surrounding facts and circumstances, including evidence of trade usage. 

Facts:

Plaintiff copyright assignee and defendant hardcover publisher of a novel, executed a licensing agreement whereby defendant would publish the softcover edition "not sooner than" one year later. When plaintiff learned of defendant's' plans for early shipping and promotion, plaintiff sued for breach of contract, copyright infringement, and injunctive relief. The injunction was denied, and the complaint was dismissed. Defendant's paperback edition became a bestseller before the contractual publishing date. Plaintiff appealed the dismissal of the case.

Issue:

Did the Court err in dismissing the case?

Answer:

Yes

Conclusion:

The Court reversed the order, holding that while the trial court correctly found the term "publish" ambiguous, and properly admitted evidence of industry custom and practice to conclude that shipping was not a breach, it failed to consider substantial sales. The appellate court construed the phrase "not sooner than" in the agreement against defendants, who prepared the agreement, and attributed to them constructive knowledge that plaintiff did not intend substantial sales of the paperback edition before the publishing date. Thus, the judgment was reversed, and the case was remanded.

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