This section is from the book "The Law Of Contracts", by William Herbert Page. Also available from Amazon: Commercial Contracts: A Practical Guide to Deals, Contracts, Agreements and Promises.
If a promise is so ambiguous as to be susceptible of more than one interpretation and the promisor knows which of these possible meanings the promisee attaches to the promise, that meaning will be adopted by the court in construing the contract.1 The same rule applies where the promisor has reason to suppose that the promisee understands the ambiguous promise in a particular sense.2 This rule applies to express contracts as well as to implied ones,3 and to written contracts as well as to oral ones.4 It does not apply to mere negotiations as distinguished from offers, intended on acceptance, to become contracts.5 If the other party does not know of the construction placed upon the contract, the understanding of the one party has no legal effect.6 Thus where A's attorney drew the contract and A directed its phraseology, but by inadvertence of counsel it was so worded that B's understanding was prima facie expressed, though it might possibly have been consistent with A's meaning, A's intention cannot control.7 If the meaning of the contract is clear, the understanding of one party as to its meaning does not affect its construction8 unless it operates as estoppel by inducing the other party to act.9
A. 25; Gadsden, etc., Ry. v. Improvement Co., 128 Ala. 510; 29 So. 549; Pierce v. Merrill, 128 Cal. 464; 79 Am. St. Rep. 56; 61 Pac. 64; In-graham v. Mariner, 194 111. 269; 62 N. E. 609; Western Railway Equipment Co. v. Iron Co., 91 111. App. 28; Diamond Plate-Glass Co. v. Ten-nell, 22 Ind. App. 132; 52 N. E. 168; Menage v. Rosenthal, 175 Mass. 358; 56 N. E. 579; St. Paul, etc., Ry. v. Blackmar, 44 Minn. 514; 47 N. W. 172; C. D. Smith Drug Co. v. Saunders, 70 Mo. App. 221; Howell v. Johnson, 38 Or. 571; 64 Pac. 659; Arnold v. Farr, 61 Vt. 444; 17 Atl. 1004.
12 Northeastern Ry. v. Hastings (1900), App. Cas. 260; 69 L. J. Ch. N. S. 516; 82 L. T. 429. (Here a construction placed upon a continuous contract for forty years was disregarded.)
13 Ingraham v. Mariner, 194 111. 269; 62 N. E. 609.
14 Cincinnati v. Coke Co., 53 O. S. 278; 41 X. E. 239; reversing, 8 Ohio C. C. 429; 6 Ohio C. D. 278.
1 Allen-West Commission Co. v. Patillo, 90 Fed. 628; 33 C. C. A. 194; American Loan & Trust Co. v. Ry., 47 Fed. 343; Chicago Lumber Co. v. Mfg. Co., 80 Ia. 369; 45 N. W. 893; Wood v. Allen, 111 Ia. 97; 82 N. W. 451; Schroeder v. Nielson, 39 Neb. 335; 57 N. W. 993; Hoffman v. Ins. Co., 32 N. Y. 405, 413; 88 Am. Dec. 337; Barlow v. Scott, 24 N. Y. 40; Kendrick v. Ins. Co., 124 N. C. 315; 70 Am. St. Rep. 592; 32 S. E. 728. In some states as in Iowa this rule has been enacted as a statute.
2 Kendrick v. Ins. Co., 124 N. C. 315; 70 Am. St. Rep. 592; 32 S. E. 728.