More than fifty years ago, a federal court in New York asked the question, “What is chicken?” when a contract for the sale of 100,000 pounds of frozen chicken led to a dispute. (The judge ruled that “chicken” could include stewing chickens, instead of the broilers and fryers the buyer wanted.) The Oregon Court of Appeals recently decided a similar case involving how to interpret the phrase “existing roads” in an easement, providing a good example of how courts interpret contracts.
The case of Kalfas v. Adams involved two adjoining parcels of land in a remote part of southern Oregon. The Cutlers, who were the original owners of both parcels had separated the southwest corner from the larger parcel and obtained approval from the county to build a home on the southwest parcel. They then sold the larger parcel to the Furrows.
At the time of the sale to the Furrows, a private road later called the Adams Road ran from a public road across the larger parcel and across the eastern boundary of the southwest parcel. A second road, later called the Ridge Road, then ran from the Adams Road northward across the northern boundary of the southwest parcel. There was no other access to the southwest parcel, nor was there any other access to the area reached by the Ridge Road. Both parcels had logging roads in varying states of disrepair, and the Ridge Road was only capable of access by motorbike or ATV because of its condition.
The Cutlers and the Furrows gave each other written easements “across all existing roads (logging, main roads and any others) as well as any roads that may be built in the future).” The contract acknowledged that the property included “a private road and logging roads,” and stated that “[t]he present improved private road is presently graded and graveled and is utilized as a road . . . .” Later, the Cutlers had the Adams Road extended to a building site not at the location originally approved by the county, and sold the southwest parcel to Adams, who built a house on the building site.
The Furrows then sold the larger parcel to the Kalfases, who used the Adams Road and Ridge Road to reach the western part of it.
After a burglary at Adams’ house, she installed an unlocked gate at the point the Adams Road crossed the boundary. The Kalfases objected, claiming this interfered with their rights under the easement. They also claimed that Adams’s landscaping design interfered with use of the Ridge Road. When the Kalfases and Adams were unable to settle the dispute, the Kalfases sued, asking the court to interpret the easement and decide whether either the gate or the landscaping interfered with the Kalfases’ rights.
The opinion of the Court of Appeals is a good demonstration of a key principle of interpreting contracts that is followed in almost every state: a contract means what the parties would have understood each other to have meant. For example, in the chicken case that I mentioned earlier, the buyer never made it clear to the seller that it wanted broilers and fryers, and the prices didn’t make it clear that was what was expected, so the seller wasn’t at fault for sending stewing chickens.
In Oregon, if a contract’s language is unambiguous, that’s enough to show what the parties meant, and the court will interpret the contract solely based on those terms. In the Kalfas case, the Court of Appeals decided that the reference to multiple roads in the easement agreement and identification of only one road graded for motor vehicles made it clear that the easement was intended to cover all of the roads on the two parcels, regardless of condition. (On the other hand, the gate was not an unreasonable interference with the Kalfases’ use and could stand. The question of whether the landscaping was an improper interference was not decided because the trial court thought it didn’t have to answer that question based on the way it had ruled. The Court of Appeals told it to go back and look at the landscaping.)
The most significant lesson from the Kalfas case and the chicken case is that if it can be done without negotiations breaking down, and if the cost isn’t more than the deal is worth, making sure the other side to a deal understands exactly what is intended, and ensuring that everyone agrees on that intent, is a good idea. On the other hand, it is very common to let this go because a problem isn’t noticed in advance, or because asking might frighten away the other side. If it’s not going to destroy the deal, consider asking and documenting (or having a lawyer review the paperwork before signing). And if it isn’t asked, document all the circumstances so that the question can be looked into should something go wrong.