Cole v. Industrial Fibre Co.
157 S.E. 857
N.C.
1931
Check Treatment
Stacy, C. J.,

after stating the case: It was error to submit the original contract to the jury to ascertain the intention of the parties, and to hold that the supplemental agreement, from and after its execution, 23 February, 1927, covered commissions on cancellations. Mining Co. v. Smelting Co., 122 N. C., 542, 29 S. E., 940. The parties themselves, during the peaceful life of the contract, construed it otherwise and so applied it in the practical operation of their business.

The general rule is, that where, from the language employed in a contract, a question of doubtful meaning arises, and it appears that the parties themselves have interpreted their contract, practically or otherwise, the courts will ordinarily follow such interpretation, for it is to be presumed that the parties to a contract know best what was meant by its terms, and are least liable to be mistaken as to its purpose and intent. S. v. Bank, 193 N. C., 524, 137 S. E., 593; Wearn v. R. R., 191 N. C., 575, 132 S. E., 576; Lewis v. Nunn, 180 N. C., 159, 104 S. E., 470; Guy v. Bullard, 178 N. C., 228, 100 S. E., 328; Plumbing Co. v. Hall, 136 N. C., 530, 48 S. E., 810; 2 Williston on Contracts, sec. 623; 13 C. J., 546. “Parties are far less liable to have been mistaken as to the meaning of their contract during the period while harmonious and practical construction reflects that intention, than they are when subsequent differences have impelled them to resort to law, and one of them then seeks a construction at variance with the practical construction they have placed upon it of what was intended by its provisions.” 6 R. C. L., 853.

It is often said that “the construction of a contract, when in writing or agreed upon, is a matter of law for the courts.” Barkley v. Realty Co., 170 N. C., 481, 87 S. E., 219. This is true, and in “those written contracts which are sufficiently ambiguous or complex to require construction, the general rule is that the intention of the parties is the polar star. ... If the words employed are capable of more than *488 one meaning, the meaning to be given is tbat which it is apparent the parties intended them to have.” King v. Davis, 190 N. C., 737, 130 S. E., 707. Frequently, this intention can best be gathered from the practical construction of the contract which the parties themselves have adopted and observed during the period of harmonious operation. Mitchel v. Heckstall, 194 N. C., 269, 139 S. E., 438.

Speaking to the subject in Manhattan Life Ins. Co. v. Wright, 126 Fed., 82, Sanborn, Circuit Judge, delivering the opinion of the Court, says: “The practical interpretation given to their contracts by the parties to them while they are engaged in their performance, and before any controversy has arisen concerning them, is one of the best indications of their true intent, and courts that adopt and enforce such construction are not likely to commit serious error,” citing a number of authorities for the position.

To like effect is the holding in Hull Co. v. Westerfield, 107 Neb., 705, 186 N. W., 992, 29 A. L. R., 105 (as expressed in the fourth headnote): “The interpretation or construction given contracts by the parties to them, while engaged in their performance before any controversy has arisen, is one of the best indications of their true intent and meaning, and the courts should ordinarily enforce such construction.” See, also, Hammett Oil Co. v. Gypsy Oil Co., 95 Okla., 235, 218 Pac., 501, 34 A. L. R., 275.

The reason for following the practical interpretation of the parties is stated by Mr. Justice Nelson in Chicago v. Sheldon, 9 Wall., 50, as follows: “In cases where the language used by the parties to the contract is indefinite or ambiguous and, hence, of doubtful construction, the practical interpretation by the parties themselves is entitled to great, if not controlling, influence. The interest of each, generally, leads him to a construction most favorable to himself, and when the difference has become serious, and beyond amicable adjustment, it can be settled only by the arbitrament of the law. But, in an execu-tory contract, and where its execution necessarily involves a practical construction, if the minds of both parties concur, there can be no great danger in the adoption of it by the court as the true one.” Quoted with approval in Topliff v. Topliff, 122 U. S., 121.

Finally, we may safely say that in the construction of contracts, which presents some of the most difficult problems known to the law, no court can go far wrong by adopting the ante litem moiam practical interpretation of the parties, for they are presumed to know best what was meant by the terms used in their engagements. Anson on Contract, p. 436.

Nor is the practical construction placed upon the contract by the parties in the instant case at variance with the terms of the instrument *489 itself. It is provided in tbe original agreement that commissions will be paid “on all net sales accepted by tbe Industrial Fibre Company,” wbicb provision is expressly brought forward and made a part of tbe supplemental agreement. Tbe dual purpose of tbis supplemental agreement was to reduce tbe plaintiffs’ territory and to substitute “a new rate of commission,” but tbe basis of tbe rate, i. “on all net sales,” was left unchanged. Tbe parties understood, and so interpreted their agreement to mean, that commissions would be paid on all “net sales,” that is, sales completed by deliveries and made on orders accepted by tbe defendants for tbe territory mentioned in tbe contract. The term “net sales,” then, as intended by tbe parties, according to their own construction of tbe contract, was used in tbe sense of sales completed by deliveries out of orders accepted by tbe defendants for the territory in question. Tbis interpretation not only accords with tbe understanding of tbe parties, but it also fits in with tbe ordinary meaning of tbe language employed, when viewed in tbe light of what tbe parties were undertaking to accomplish by their agreement.

Tbe terms “accepted by tbe Industrial Fibre Company,” used in tbe original agreement, and “orders which we accept,” employed in tbe supplemental agreement, were intended to protect tbe defendants from excessive orders, and to authorize a proportional allotment of “sales and deliveries” to tbe different territories and different agents according to tbe ability of tbe defendants, with their limited capacity output, to fill said orders. Tbis is tbe meaning wbicb tbe parties themselves placed upon tbe terms of tbe contract.

Tbe law is, that “an agreement ought to receive that construction wbicb will best effectuate tbe intention of tbe parties to be collected from tbe whole of tbe agreement,” and that “greater regard is to be bad to tbe clear intention of tbe parties than to any particular words wbicb they may have used in tbe expression of their intent.” Anson on Contract, p. 425; Wigmore on Evidence, sec. 2460; Porter v. Construction Co., 195 N. C., 328, 142 S. E., 27. “A word is not a crystal, transparent and unchanged; it is tbe skin of a living thought and may vary greatly in color and content according to tbe circumstances and tbe time in wbicb it is used,” says Mr. Justice Holmes in Towne v. Eisner, 245 U. S., 418. General or particular meaning-content, therefore, may be imputed to words and phrases according to tbe circumstances of their use and tbe objects sought to be accomplished by tbe parties. This is not at variance with tbe rule that tbe written word abides, and that tbe terms of a contract put in writing may not be varied or contradicted by parol, but is entirely consonant therewith. Tbe one belongs to tbe field of evidence, tbe other to tbe construction of contracts. Spragins v. White, 108 N. C., 449, 13 S. E., 171.

*490 Tbe court’s erroneous construction of the contract necessarily affected the measure of damages for its breach, hence a new trial must be awarded on the second cause of action as well as on the first.

This disposition of the defendants’ appeal renders the question of interest, presented by plaintiffs’ appeal, and the liability of the defendants for commissions on sales made to Hillerest Silk Mills, unnecessary to be decided on the present record.

New trial.