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standing: “the courts do not make a contract for the parties.” Ordinarily, therefore, the mutual under-standing of the parties prevails even where the contractual term has been defined differently by statuteor administrative regulation. But parties who used a standardized term in an unusual sense obviouslyrun the risk that their agreement will be misinterpreted in litigation.Illustrations:1. A and B agree that A will sell goods to B “f.o.b.” the place of destination. Prior correspondence showsthat the price has been adjusted on the assumption that B’s insurance policies will cover the goods dur-ing shipment. Notwithstanding the normal meaning of the “f.o.b.” term declared in UniformCommercial Code § 2-319, it may be found that the parties have “otherwise agreed” under that sectionand that B bears the risk in transit.2. A signs a negotiable promissory note payable to B’s order, and C signs his name on the back with outmore. Under Uniform Commercial Code § 3-402, C’s signature is an indorsement, and evidence of a con-trary understanding is not admissible except for the purpose of reformation of the instrument. This con-
204 INSTRUCTOR’S MANUAL TO ACCOMPANY BUSINESS LAW, ELEVENTH EDITIONclusion does not rest on interpretation of the writing.3. A agrees to sell beer to B at a specified price per barrel. At the time of the agreement both partiesand others in their trade use as standard barrels wooden barrels which originally hold 31 gallons andhold less as they continue in use. A statute defines a barrel as 31 1/2 gallons. The statute does not pre-vent interpretation of the agreement as referring to the barrels in use.d. Misunderstanding. Subsection (2) follows the terminology of § 20, referring to the understanding ofeach party as the meaning “attached” by him to a term of a promise or agreement. Where the rulesstated in Subsections (1) and (2) do not apply, neither party is bound by the understanding of the other.The result may be an entire failure of agreement or a failure to agree as to a term. There may be abinding contract despite failure to agree as to a term, if the term is not essential or if it can be supplied.See § 204. In some cases a party can waive the misunderstanding and enforce the contract in accor-dance with the understanding of the other party.Illustrations:4. A agrees to sell and B to buy a quantity of eviscerated “chicken.” A tenders “stewing chicken” or“fowl”; B rejects on the ground that the contract calls for “broilers” or “fryers.” Each party makes aclaim for damages against the other. It is found that each acted in good faith and that neither had