Thursday, July 12, 2012

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May an Idaho defendant utilize extrinsic evidence in elucidating the intent of a contract if its defining terms are ambiguous?


Yes, a defendant may utilize extrinsic evidence to clarify the ambiguous terminology of a contract, if by use of such terms the contract’s intent is uncertain.


1. Cline v. Hoyle & Associates Ins. Inc., 67 Pd 1176 (Idaho 185)

2. Bonner v. Panhandle Rodeo Asso., 60 Pd 110 (Idaho 180)

3. Bergkamp v. Carrico, 101 Idaho 65, 61 Pd 76 (Idaho 180)

4. Werry v. Phillips Petroleum Company, 7 Idaho 10, 540 P.d 7 (Idaho 175)

5. Dille v. Doerr Distributing Co., 867 P.d 7 (Idaho App. 1)

6. Hoffman v. United Silver Mines, Inc., 116 Idaho 40, 775 P.d 1 (Idaho App. 18)


Mr. and Mrs. James wish to determine whether or not a court would accept their contention that the contract between themselves and Inland Dairy, Inc. is limited to their operation of Willy’s Convenience Store in Post Falls, Idaho or also applies to their doing business as Maggie’s Convenience Mart in Kellogg, Idaho. A recording of a heated telephone conversation between Mr. James and the chief operating officer of Inland Dairy indicates that the contract did indeed apply only to Willy’s Convenience Store, but that the ambiguity of the wording may permit Inland Dairy to include Maggies Convenience Mart, in spite of the fact that Maggie’s opened after the contract was signed. The Jameses will likely attempt to convince the court to address the issue narrowly so as to limit the applicability of the contract to Willy’s Convenience Store, whereas it is plausible that Inland Dairy will frame the contract’s terms broadly, so as to include Maggie’s Convenience Mart..



The determinant issue of this case is whether Idaho law allows the use of extrinsic evidence to explicate the ambiguous terminology of a contract. When a contract’s terms are clear and concise involving no ambiguity, parties cannot generally submit extrinsic evidence contrary to the contract’s terms. However, in certain cases where ambiguity exists, many courts allow for admission of such information. Idaho law not only specifies that extrinsic evidence is admissible when used to clarify intent; it indicates that it is advisable for the courts to utilize this information in deriving intent. It is probable that the court will find the terms of the contract between the James’ and Inland Dairy, Inc. ambiguous because the parties disagree regarding the terminology defining its purpose. Therefore, extrinsic evidence of a phone conversation they had will likely be admitted because, aside from the contract itself, it is the only material source of information available regarding the contract’s intent. The James ’claim that the contract terms are ambiguous accompanied by the content of Mr. James’ conversation with Mr. Bennett, infers that the contract applies and should be limited to Willy’s Convenience Store. Although Mr. Bennett is likely to say that his statements were made under duress due to Mr. James’ aggravated state, this defense is not likely to override the evidence because Idaho law states that when there are disagreements regarding a contract, the meaning of the contract should be interpreted against the preparing party. Therefore, based on the extrinsic evidence available, it is probable that the court will find in favor of the James’ interpretation of the contract. This memo discusses the pertinent cases regarding the issue.

Deriving Contract Intent from Admission of Extrinsic Evidence

The threshold question presented by this case is whether the contract between the two parties is ambiguous. Answering this question in the affirmative produces the issue being addressed herein. Because the terms of their contract appear ambiguous, will the court allow the admission of extrinsic evidence in its clarification? If so, will the use of this extrinsic evidence support Mr. and Mrs. James? Idaho case precedent indicates it is likely the court will allow extrinsic indicia into evidence.

The nexus of the disagreement is ambiguous contract terminology. Therefore, the James’ claim in the instant case will likely posit that the contract is ambiguous and should therefore be interpreted narrowly so as to include only Willy’s Convenience Store, to the specific exclusion of Maggie’s Convenience Mart. In support of their claim, the James’ wish to utilize a recording of a telephone conversation between Mr. James and the Chief Operating Officer of Inland Dairy, Mr. Bennett, in which he admits that their verbal agreement was that the contract would apply only to Willy’s Convenience Store but the written contract demands compliance from both stores. As stated above, Idaho law admits extrinsic evidence when the intent of a contract is ambiguous, Bergkamp. Given the nature of the case, where the opposing contracting parties have conflicting views as to the intent of the contract, it is plausible the court will find ambiguity, Dille. As in Werry, where the court finds ambiguity and is forced to derive the intent of a contract the court construes doubtful language against the party who provided the wording of the contract. Since Inland Dairy mastered the contract, this provision is likely to benefit the James’ claim. Because the court is likely to find ambiguous intent and consequently admit the James’ extrinsic evidence, it is plausible the court will construe the terms in favor of the James’ interpretation.

Inland Dairy’s claim will likely posit that the ambiguity in the contract was purposeful; the specific intent of the contract’s ambiguity was to include all convenience store businesses operated by the James’. In response to the phone Mr. Bennett’s admission during the phone conversation with Mr. James, they will likely refute its validity because the admission was made under duress. Mr. Bennett may have made the admission to calm Mr. James down, in order that he might have a rational conversation with him. Regardless of whether the admission was genuine or not, it occurred after the formation of the contract. It is likely Inland Dairy will posit that since the claim was made after the contract was formed and signed it cannot be held binding. Although there may be some merit to some or all of Inland Dairy’s arguments, it is not likely that they will persuade the court to interpret the contract broadly so as to include Maggie’s Convenience Mart.


Where conflicting interpretations regarding the intent of a contract exist, the contract is deemed ambiguous. If ambiguity is present within a contract the court may construe its intent. The court’s derivation of the contract’s intent may be based upon extrinsic evidence. The extrinsic evidence in this case indicates that the contract was formed with the specific intent to include only Willy’s Convenience Store. Therefore, it is likely the court will interpret the contract’s intent as narrow and limited in its scope to Willy’s Convenience Mart.

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