The Frigaliment case is studied by law students across the country, because it lays out and applies the standard maxims of contract interpretation, and illustrates how courts deal with ambiguous terms.
The case of Frigaliment Importing Co. v. B.N.S. International Sales Corp. is all about chicken.
Though the word “chicken” might not seem like a subjective term, there was enough ambiguity
in it to cause two parties to litigate the issue.
Plaintiff Frigaliment Importing Co. contracted with poultry supplier (and defendant) B.N.S.
International Sales Corp. (BNS) for the sale and delivery of chicken at a set price. The
negotiations took place mainly in German, but the English word for “chicken” was
used. Frigaliment, a Swiss company, understood the English word “chicken” to mean young
chickens that could be used for boiling and frying (that is, broilers), instead of the German word
“huhn,” which includes stewing chickens (or fowl). The market price for broilers was
roughly 20 percent higher than the going rate for fowl. The contract itself was silent on
the definition of “chicken,” and the parties set the contract price point halfway between
the prevailing prices for broilers and fowl. American company BNS, a newcomer to the industry,
interpreted Frigaliment’s order for “chickens” as including both broilers and fowl, and its
first shipment to Frigaliment contained mostly the less expensive fowl. Frigaliment complained
about the fowl in the order, but accepted delivery of the shipment and permitted BNS
to proceed with the second shipment. After finding fowl in the second shipment, Frigaliment
sued BNS in federal district court for breach of warranty, claiming that BNS delivered goods
that did not match the description in the contract. At trial, both parties offered evidence
in support of their own interpretation of the ambiguous term–“chicken.”
Judge Friendly held for BNS and dismissed the complaint. The court found that, when
parties to a contract subjectively construe an ambiguous term differently, courts must
look externally to determine the proper meaning of the term. Specifically, Friendly held that
courts may consider the plain meaning of the term, the negotiations between the parties,
other contract provisions, market factors, the course of dealing between the parties,
and trade usage. In this case, the plain meaning wasn’t helpful, because both parties’
interpretations were included in dictionary definitions of “chicken.” The negotiations
between the parties didn’t shed much light either, because the German/English language
barrier obscured the issue. Other contract provisions suggested BNS’s interpretation
was correct, such as the incorporation by reference of the U.S. Department of Agriculture
grading regulations, which include both broilers and fowl in the definition of "chicken." Market
factors also weighed in favor of BNS, because BNS persuasively argued that it couldn’t
get fryers for the agreed-to price. Similarly, the course of dealings between the parties
also indicated that BNS’s definition was the right one, because Frigaliment accepted
the first shipment even though it contained stewing chickens. With respect to trade usage,
the court said when one party is not a member of the trade, the other party has to show
that the newcomer actually knew about the trade usage or that the usage is so widespread
that the court could presume the newcomer had accepted it. Here, BNS was too inexperienced
in the industry to know chickens meant fryers only, and Frigaliment could not show the the
usage was widespread enough to be presumed. After considering all of the evidence, Judge
Friendly dismissed Frigaliment’s complaint, because BNS’s interpretation of chicken
was consistent with one objective definition of the word, and Frigaliment hadn’t met
it’s burden of persuading the court that a narrower definition should apply.
If you found this video helpful, you can explore all of our content by visiting us at Quimbee.com.
If you have a question or comment about this case, please post in the comments area below,
and we’ll do our best to get back to you. If you think we did a good job with this video,
please like, share, and favorite this video. And if you think this video might be helpful
to people you know, please share on social media, Facebook, Twitter, and Google+ to get
this video out there.
If you haven’t done so already and you enjoy watching videos on this channel, click on
the red subscribe button just below this video, so you can get all the latest updates.