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The primary rule for interpreting written contracts is to ascertain the parties' intent. If the terms of the contract are clear, the intent of the parties is to be determined from the language of the contract without applying rules of construction. If, on the other hand, the court determines that a written contract's language is ambiguous, extrinsic or parol evidence may be considered to construe it. In addition, an interpretation of a contractual provision should not be reached merely by isolating one particular sentence or provision, but by construing and considering the entire instrument from its four corners. The law favors reasonable interpretations, and results which vitiate the purpose of the terms of the agreement to an absurdity should be avoided. In general, parties may contract to any terms so long as they are neither illegal nor contrary to public policy.
This is a $550,000 price dispute arising out of plaintiff's right of first refusal to purchase a Wichita waste transfer station from defendant. The catalyst was a third-party's agreement to buy the transfer station and an adjoining landfill as a package deal or to buy the landfill alone. The district court judge granted summary judgment to defendant Ritchie Corporation (Ritchie). Court of Appeals reversed the summary judgment in Ritchie's favor, ruled that summary judgment should have been granted to plaintiff Waste Connections of Kansas, Inc. (Waste Connections), and ordered remand to the district court for determination of attorney fees. Ritchie argued that the Court of Appeals erred by discounting the role of Ritchie's business judgment when evaluating Waste Connections' breach of contract claim for violation of the implied duty of good faith and fair dealing, by holding that Waste Connections was not contractually obligated to pay $2 million for the station, and by disregarding controverted facts that should prevent judgment as a matter of law in Waste Connections' favor.
Did genuine issues of material fact remain on Waste Connections' breach of contract action against Ritchie, thus, making summary judgment for either party inappropriate?
The court held that a grant of summary judgment in favor of Waste Connections’ breach of contract action against the seller was inappropriate as to either party because genuine issues of material fact remained. In part, because Ritchie voluntarily surrendered its unfettered judgment when it signed the Escrow Agreement containing the right of first refusal, it did not inevitably escape liability simply by invoking its business judgment and profit maximization goals. Waste Connections also must have abided fully by the Escrow Agreement; it did not get the benefit of a presumption of Ritchie’s breach or bad faith from ambiguous price language in the Asset Purchase Agreement. Such a presumption failed to recognize the legitimate role of a seller's intention to sell in activation and exercise of a right of first refusal.