Facts
- Roscoe P. Hurst agreed in writing to sell W. J. Lake & Co., Inc. approximately 350 tons of horse-meat scraps at $50 per ton, f.o.b. Portland, with a specification of “Minimum 50% protein.”
- A same-day supplemental writing provided that if any scraps “analyzes less than 50% of protein,” the buyer would receive a $5 per ton discount.
- Hurst delivered roughly 349–350 tons; laboratory testing produced results in multiple ranges.
- Lake paid $50 per ton for lots testing above 50% protein and paid $45 per ton for lots testing about 48.66% protein.
- For approximately 140 tons testing between 49.53% and 49.96% protein, Lake paid $45 per ton, applying the $5 discount based on a literal reading of “less than 50%.”
- Hurst alleged a well-established trade usage, known to both parties in the horse-meat-scrap business, that treated protein content of at least 49.5% as meeting a “50%” minimum due to customary tolerance in testing.
- Hurst sued to recover the unpaid $5 per ton on the 140-ton lot, asserting that under trade usage the discount applied only when protein tested below 49.5%.
- The trial court granted Lake judgment on the pleadings, ruling the contract language was unambiguous and not subject to modification by usage evidence.
Issues
- Whether a plaintiff may rely on alleged trade usage to interpret contract terms stating “minimum 50% protein” and a discount if the product “analyzes less than 50% of protein,” when the parties are alleged to be members of the trade and familiar with the usage.
- Whether such usage evidence is barred as a matter of law at the pleading stage by the parol-evidence rule or a “plain meaning” approach to ostensibly precise numerical terms.
Decision
- The Oregon Supreme Court reversed the judgment on the pleadings and remanded.
- The court held that the complaint stated a claim because it alleged an established trade usage known to both parties that could supply the trade meaning of the percentage terms.
- The court concluded that excluding usage evidence at the pleading stage was error where the alleged usage explained the sense in which the parties used the written terms.
Legal Principles
- Contract language may be interpreted in light of trade usage when the parties are engaged in the relevant trade and the usage is known (or is alleged and later proved to be known) to them.
- Evidence of trade usage may be admissible to explain the meaning of contractual terms, even when the terms appear facially definite or numerical.
- The parol-evidence rule does not bar evidence offered to interpret the meaning of words as used in a trade, so long as the evidence is offered to explain rather than to contradict the agreement.
- On a motion for judgment on the pleadings, the court must accept well-pleaded allegations as true; if those allegations support a plausible trade-based meaning, dismissal is improper.
Conclusion
The court held that alleged trade usage could define the parties’ intended meaning of “50% protein” and “less than 50%,” making the complaint legally sufficient and requiring reversal of judgment on the pleadings so the asserted usage could be proved at trial.