News & Noteworthy



Authored - NJ Contract Law Update - Finding Pacifico
JANUARY 28, 2013 | Windels Marx - Commercial Litigation

Trico Equipment, Inc. v. Ellsee Construction Co., L.L.C., ___ N.J.Super. ___, 2012 WL 6600319 (N.J.App.Div. Dec. 19, 2012), first presents us with a number of interesting features--but then concludes us with the anomaly of an appellate court overlooking controlling New Jersey Supreme Court precedent on the issue of construing ambiguities.

The Facts

Trico involved a purely commercial transaction between Ellsee and Trico, a leasing company that rented certain construction equipment to Ellsee. The facts (and the Court's corresponding conclusions) were these:

  1. Ellsee rented a piece of heavy construction equipment from Trico, to demolish certain buildings.
  2. The companies had done business years before, but not in any way the Court deemed pertinent.
  3. The machine sprang a hydraulic leak and stopped working on the second day.
  4. After retrieving the machine, Trico sent an invoice to Ellsee for rental and related fees totaling $2,066.50. Ellsee paid that amount by credit card.
  5. Trico later concluded that the equipment had been damaged by Ellsee's "misuse" and sought to charge Ellsee for the repair cost of $9,961.10.
  6. The transaction apparently occurred remotely (whether by phone or otherwise); so that although Trico used its computer system to process the transaction, there does not appear to have been any face-to-face contact. For this reason, it apparently went unnoticed that Trico never issued its standard written contract, even though the computer proceeded (and coded all other documents) as though it had.
  7. There was a confusing damage-waiver provision, in one of Trico's actual documents, that ostensibly effectuated coverage of potential damage to the equipment through a surcharge of 14%. The Court implied that this ostensibly conflicted with another, provision in the documents. There was 'first' an "insurance certificate request" clause seeking to determine if Ellsee had special coverage for the equipment. It did not, so the 14% surcharge applied. Ellsee testified that this was done consciously; as providing its own insurance certificate would have cost more than the 14%.
  8. As found by the Court, the leak occurred because the equipment was damaged while with Ellsee.
  9. Implicitly, the Court further found that there was no misuse of the equipment by Ellsee, in the sense that would have gone beyond the intent of the insurance coverage/surcharge.
  10. The prior dealings were not controlling or informative in any way.
  11. There was no violation of New Jersey Consumer Fraud Act ("CFA"). Ellsee claimed that the failure to provide a copy of the contract was a consumer fraud violation, in terms of not providing a copy of the contract. The Court found that because there was no specific regulation mandating a written contract in this precise circumstance, the lack of a written contract (for whatever reason that lack occurred) made the 'must provide copies' law inapplicable. The failure to provide a written contract may have been a breach of the Uniform Commercial Code; but the issue in the case was whether anything occurred (or whether any omission occurred) that would have made the CFA applicable. The answer, simply stated, was 'no'.1

All of this analysis was perfectly justifiable. However, the Court fixed on Driscoll Construction Co. v. New Jersey Department of Transportation, 371 N.J.Super 304, 318 (App.Div. 2004), to say:

  • Where an ambiguity exists in a contract allowing at least two reasonable alternative interpretations, the writing is strictly construed against the drafter.

The Court quoted this provision to reinforce its belief that the 14% surcharge controlled over additional language it implied was arguably contrary: "A loss occasioned by damage to the equipment does not release you from the obligation to pay the amounts due under your contract."

The problem with this latter analysis is that the quoted language conflicts with Pacifico v. Pacifico, 190 N.J. 258 (2007); which is controlling law, and overruled sub silentio the general proposition quoted by Trico from Driscoll. As explained in my April 17, 2012 Article, "Construing Language Against the Drafter", Pacifico indicates that 'construction against the drafter' principles should be utilized only as a last resort--and essentially never when dealing with two commercial entities on rough par, as was obviously the case in Trico. Rather, the Court should have striven to determine what was intended from other principles, including the logic of the circumstances. Such an analysis would likely have yielded the same result, or at most a remand to determine actual intent.

In fact, it appears that the surcharge language was in fact more specific and definite than the "loss occasioned" language. Indeed, that language does not appear to relate at all to the ability to add additional charges for damage, but rather the requirement to pay the principal amount of the lease in the event of damages, as was done.

Thus, the resort to Driscoll was not only inaccurate but unnecessary. Trico continues a somewhat disconcerting trend of the lower-courts disregarding Pacifico.2

Moral of the Story

The moral of the story is that the advocate of enforcing actual intent should focus on Pacifico. I suppose that the advocate of anti-Pacifico principles may 'get lucky', even though that advocate has an ethical duty to call Pacifico to the Court's attention.

Contact & Legal Disclaimer

Clark Alpert is the author of Guide to New Jersey Contract Law, published by the New Jersey Institute for Continuing Legal Education, originally published in 2007 and updated in November 2011. His updates on New Jersey contract law are based in recent issues and practical methods for addressing similar situations in your practice or business. They are not intended to serve as legal advice. Clark welcomes your questions and comments.


1 Interestingly, the Court steered away from the question of whether the transaction was sufficiently 'commercial' in nature (to oversimplify the relevant legal test) to make the CFA inapplicable in its entirety. See my September 21, 2012 Article, "The Scariest Contract-Substitution Claim?"; generally commenting on this complex issue.

2 See my April 17, 2012 article referenced above.

 

 

 

 

 




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