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.
In some of the cases in which the practical construction of the parties has been considered, the words and the conduct of the parties suggest a new contract almost as much as they suggest a construction of an existing contract.1 The acceptance by one party of the interpretation which the adversary party places upon a contract, is treated as an agreement as to the meaning of the contract which will be binding upon both.2 The practical construction which is put upon a contract by the parties is to be regarded, however, as distinct from evidence tending to show the existence of a new contract.3
1915A, 246, 140 Pac. 1059; Ellis v. Stone, 21 N. M. 730, L. R. A. 1916F, 1228, 158 Pac. 480.
33Ingraham v. Mariner, 194 111. 269, 62 N. E. 609.
34 Ellis v. Stone, 21 N. M. 730, L. R. A. 1916F, 1228, 158 Pac. 480.
35 State, ex rel., v. Water Supply Co., 19 N M. 36, L. R. A. 1915A, 246, 140 Pac. 1059.
36 State, ex rel., v. Water Supply Co., 19 N. M. 36, L. R. A. 1915A, 246, 140 Pac. 1059.
37 State, ex rel., v. Water Supply Co.,
19 N. M. 36, L. R. A. 1915A, 246, 140 Pac. 1059.
38 Cincinnati v. Coke Co., 53 O. S. 278. 41 N. E. 239 [reversing. 8 Ohio C. C. 429, 6 Ohio C. D. 278].
1 Birmingham Waterworks Co. v. Hernandez, 196 Ala. 438, 7l So. 443; Mark v. Stuart-Holland Co., 226 Mass. 35, 115 N. E. 42.
For an example of a new contract, see Shopper Publishing Co. v. Skat Co., 90 Conn. 317, 97 Atl. 317.
2 Mark v. Stuart-Howland Co., 226 Mass. 35, 115 N. E. 42; Shopper Publishing Co. v. Skat Co., 90 Conn. 317, 97 At!. 317.
The difference between the practical construction of a contract by the acts and conduct of the parties and a new contract between the parties, either expressly or by fair implication, consists in the fact that if the question is one of construction, the construction thus placed upon the contract must be one of which in its original form it is fairly susceptible, while if the parties have entered into a new contract, a modification of the terms of the original contract is the very purpose for which they enter into the new contract. Evidence of the practical construction which the parties have placed upon a contract is admissible only when the contract is ambiguous.4 Evidence of a new contract, on the other hand, is admissible without any reference to the ambiguity of the original contract.5 Such evidence is a mere aid in construction and it is not governed by the rules such as the Statute of Frauds, which would have applied to the formation of the contract originally, or to the discharge of the contract by a new contract. Accordingly. if the question is one of construction, no particular form or means of proof is necessary, while if the transaction amounts to a new contract, the rules as to form of the contract, method of proof, and the like, which would apply to the original contract, may apply to the new contract,6 or it may be necessary that such new contract should be executed in some specified form in order to operate as a discharge of the original contract.7