§ 2.13 Intention to Affect Legal Relations-Social Engagements, Gentlemen's Agreements, Jests and Sham Agreements

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It is sometimes said that, in order to make an enforceable contract, it is necessary that the parties should have consciously intended to affect their legal relations. Social engagements are said not to constitute contracts, because the parties had no such intention. These statements are, to a considerable extent, erroneous. There seems to be no serious doubt that a mutual agreement to trade a horse for a cow would be an enforceable contract, even though it is made by two ignorant persons who never heard of a legal relation and who do not know that society offers any kind of a remedy for the enforcement of such an agreement.n1 However, although the statement that there can be no enforceable contract unless the parties intended to affect their legal relations cannot be supported, it is even further from the truth to say that their expressions of intention as to their legal relations are immaterial. Transactions that are ordinarily called social engagements will be legally enforceable contracts if the parties sufficiently express an intention that they shall be enforceable. Likewise, business agreements that under ordinary circumstances would be regarded as enforceable contracts are sometimes prevented from being enforceable if the parties expressly declare that they do not intend to affect their legal relations and are depending solely upon the sanctions of honor and morality.n2

It is not necessary that the parties should consciously advert to legal relations in order to make an enforceable contract, but it is important whether they express an intention to exclude legal relations.n3 The following statements may be of assistance in distinguishing between non-enforceable social engagements and contractual agreements. First, if the subject matter and terms of a transaction are such as customarily have affected legal relations and there is nothing to indicate that the one now asserting their existence had reason to know that the other party intended not to affect legal relations, then the transaction will be operative legally.n4 Second, if the subject matter and terms are not such as customarily have affected legal relations, the transaction is not legally operative unless the expressions of the parties indicate an intention to make it so.n5 Third, if the agreement or promise is such as customarily has affected legal relations and there is an expression of intention not to be bound, the situation is more complicated and no single answer will fit all the cases.

It should be noted that when the subject matter of an agreement is of a kind that is customarily dealt with in enforceable contracts, and the parties have in fact acted under the agreement, a court is likely to look with some distaste at provisions that seem to exclude all legal sanction and remedy. Cases are not wanting in which such provisions have been so interpreted as to destroy their effectiveness, with the result that the legal relations of the parties are the same as those created by ordinary contracts.n6 One commentator has observed that in such cases ''the principle of reimbursing reliance is regarded as overriding the principle of private autonomy.''n7 A Canadian scholar has observed that ''the parties are free to 'agree' without contracting, but only to the extent to which the courts permit them to do so. The courts could decide that their language or intention do not have the effect of rendering the law of contract inapplicable.''n8 One major case has gone beyond artful interpretation to protect the expectations of the party who has relied on an agreement that ostensibly was not contractual. In Greene v. Howard University,n9 the court refused to effectuate the following disclaimer: ''It will be the practice of the University, without contractual obligation to do so, to give written notice at the following times to officers of instruction whose services are no longer required ...''. The University failed to give notice of nonreappointment in accordance with this promise. Members of the faculty who were given notice much later in the academic year than specified in the handbook had already turned down or neglected other opportunities in reliance on the promise. The court ruled that, under the circumstances, the promise was binding on the University. This ruling was particularly appropriate as the handbook was a document of adhesion, the burdensome terms of which need not be given automatic effect.n10 Other cases have given redress to the promisees to the extent of the enrichment of the promisor.n11 All of these inroads into the general rule point to a rule advocated nearly a century ago by a dissenting judge who urged enforcement of a pension plan described by the employer as a ''gift.'' He wrote: ''A promise, founded upon a valuable consideration inuring to the benefit of the promisor, to pay a sum of money on specified contingencies, is not a promise to make a gift, even though the parties call it so.''n12 This is not a radical statement. The law has usually been astute to see through the misbranding of transactions to ascertain their substance.n13 At any rate, the modern law of contract does not hesitate to enforce gift promises where the elements of promissory estoppel are present.

Expressions in promissory form that are intended only as a jest or a banter and that either are in fact so understood or would be so understood by a reasonable person are not operative as either an offer or an acceptance.n14 It is otherwise, however, if the jesting element is so well concealed that the expression is reasonably understood to mean what it appears to mean.n15 The same may be said with respect to statements made as mere bluster and braggadocio.n16 These, too, can be binding promises if the promisor's state of mind is disguised from the promisee.n17

In a case where the corporate records were so drawn as to indicate a sale of oil on credit, but the surrounding circumstances showed that the sale was merely a sham made to deceive the Mexican Government, it was held that there was no contract.n18

It is only when we ask whether the expressions of agreement will affect the action of society-will be operative to create legal relations-that we must begin to differentiate between different kinds of subject-matter and different kinds of expressions. It is true that the judicial and executive officers have not in the past been interested in many subject-matters on which agreements are made, and have not been stimulated to action by such agreements-that is, these agreements do not create legal relations. The term ''social engagements'' has been applied to some of the agreements of this sort. The line of division between what is ''social'' on the one hand and what is legally operative on the other, between agreements that make contracts and those that do not, can be determined only by inductive study and comparison of what the courts have done in the past. Case by case, they have drawn a line, although like other lines, it is drawn with a wide and imperfect brush, not with a draftsman's pen. Being drawn by many hands, there are gaps in places and there are conflicting lines in other places.

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For related research and practice materials, see the following legal topics:

Contracts LawContract InterpretationGeneral OverviewContracts LawDefensesIllegal BargainsFamily LawMarital Duties & RightsCauses of ActionBreach of Promise to MarryContracts LawFormationMeeting of MindsContracts LawDefensesPublic Policy Violations

FOOTNOTES:

(n1)Footnote 1. Restatement (Second) of Contracts § 21.

Cal. - C.I.T. Corporation v. Panac, 25 Cal.2d 547, 154 P.2d 710, 160 A.L.R. 1285 (1945) .

Mass. - Ozzola v. Musolino, 225 Mass. 512, 114 N.E. 733 (1917) , statement of one party that he could not ''make out'' whether contract had been concluded.

In Hendrix v. Dominguez, 58 N.M. 216, 269 P.2d 1099 (1954) , the owner of land stated her approval of a contract to sell it, made by her father without authority. This was held to be an effective ratification, even though she ''was not conscious of the fact that her words and actions might be of legal consequence.''

In Shipp v. Ericson, 80 Ariz. 108, 293 P.2d 443 (1955) the parties executed a writing described therein as ''A Gentlemen's Agreement''; but neither party argued that it was not intended to be legally operative.

In Davison v. Holden, 55 Conn. 103, 112, 10 A. 515, 516 (1887) the court, in considering the responsibility of a member of a voluntary association on contracts made on behalf of the association said (p. 112 of 55 Conn., p. 516 of 10 A.): ''It is of no legal significance that the defendants did not intend to be individually responsible or that they did not know or believe that as a matter of law they would be.'' Similarly in McGarrigle v. Green, 76 Conn. 398, 56 A. 609 (1904) , it was held that the unexpressed intent of the parties that the agreement executed by them should be binding upon the defendant was immaterial.

In Sulzbach v. Town of Jefferson, 83 S.D. 156, 155 N.W.2d 921, 923 (1968) , the court stated: ''It is not necessary that the parties are conscious of the legal relationship which their words or acts give rise to, but it is essential that the acts manifesting assent shall be done intentionally.'' The court should have completed the thought by ending the sentence with the words ''or negligently.''

(n2)Footnote 2. The expression during negotiations of an intention not to be bound until final agreement is reached is discussed in § 2.8 and 2.9 above.

The best and most thorough discussion of the subject matter of this section is Wendell H. Holmes, The Freedom Not to Contract, 60 Tulane L.Rev. 751 (1986).

U.S. - Kind v. Clark, 161 F.2d 36 (2d Cir.1947) , cert. denied, 332 U.S. 808, 68 S. Ct. 107, 92 L. Ed. 385 ; Zell v. American Seating Co., 138 F.2d 641 (2d Cir.1943) , rev'd, 322 U.S. 709 ; Cerro De Pasco O. Corp. v. Knutsen, 187 F.2d 990 (2d Cir.1951) , citing this section.

Cal. - Smith v. MacDonald, 37 Cal. App. 503, 174 P. 80 (1918) , provision against legal enforcement.

Ga. - Monroe v. Martin, 137 Ga. 262, 73 S.E. 341 (1911) , provision against legal enforcement. In American Cas. Co. of Reading v. Griffith, 107 Ga.App. 224, 129 S.E.2d 549 (1963) , the casualty company had issued a liability insurance policy under which it was bound to pay the insured Griffith all sums that he should become legally bound to pay by reason of an automobile accident. Griffith executed, in settlement of a damage suit brought against him, a written note in which he promised to pay the injured party $7,500 ''to be payable from any sums that might be collected in a suit ... against the Casualty Company ... the holder hereof agrees that there will never be any effort to enforce the collection of the same against the maker individually and personally.'' This note was promissory in form but created no obligation on the maker; and he could maintain no action against the insurer on its promise to pay all sums he was legally bound to pay.

Ill. - Osgood v. Skinner, 211 Ill. 229, 71 N.E. 869 (1904) , parties merely gave their ''word of honor, as business men.''

Minn. - Hamilton v. Boyce, 234 Minn. 290, 48 N.W.2d 172, 174 (1951) , instrument in form of partnership agreement shown by parol evidence to have been intended to create only power of an agent, citing this section.

N.Y. - McNevin v. Solvay Process Co., 32 A.D. 610, 53 N.Y.S. 98 (1898) , aff'd, 167 N.Y. 530, 60 N.E. 1115 ; Dunhill Securities Corp. v. Microthermal Applications, Inc., 308 F.Supp. 195 (S.D.N.Y.1969) .

N.D. - Hirschkorn v. Severson, 319 N.W.2d 475 (N.D.1982) .

Tex. - Tobias v. University of Texas at Arlington, 824 S.W.2d 201 (Tex.App.1991) , error denied, certiorari denied ____________________ 506 U.S. 1049, 113 S. Ct. 966, 122 L. Ed. 2d 122 (1993). A college catalog's express disclaimer of contractual intent was given effect.

In Barnard v. Cushing, 45 Mass. (4 Metc.) 230, 38 Am.Dec. 362 (1842) , a promissory note contained the following provision signed by the payee: ''We agree not to compel payment-but to receive the same when convenient for the promisors to pay it.'' The note was held to create only an honorary obligation, not legally enforceable, whether the debtor had the financial ability to pay or not.

In Rose and Frank v. Crompton, [1925] App.Cas. 445, [1923] 2 K.B. 261, 129 L.T.R. 610, the defendants were British manufacturers who had long been doing business with the plaintiffs, an American firm. They executed an agreement in writing appointing the plaintiffs to be exclusive selling agents in the United States, making many detailed arrangements for doing of business on a large scale, and containing many mutual promises. The document then proceeded: ''This arrangement is not entered into nor is this memo written as a formal or legal agreement and shall not be subject to legal jurisdiction in the law courts either of the United States or England.'' A dispute afterwards arose and an action was brought. The English court stated that the provision just quoted had the effect of preventing any legal sanction and that the written agreement was not a contract. It held, however, that in so far as orders had been sent in under this agreement and accepted by the defendant, there was a binding informal contract for the execution of the order. Lord Justice Atkin said: ''To create a contract there must be a common intention of the parties to enter into legal obligations, mutually communicated expressly or impliedly. Such an intention ordinarily will be inferred when parties entered into an agreement which in other respects conforms to the rules of law as to the formation of contracts. It may be negatived impliedly by the nature of the agreed promise or promises, as in the case of offer and acceptance of hospitality, or of some agreements made in the course of family life between members of a family as in Balfour v. Balfour, [1919] 2 K.B. 571 . If the intention may be negatived impliedly it may be negatived expressly. In this document, construed as a whole, I find myself driven to the conclusion that the clause in question expresses in clear terms the mutual intention of the parties not to enter into legal obligations in respect to the matters upon which they are recording their agreement. I have never seen such a clause before, but I see nothing necessarily absurd in business men seeking to regulate their business relations by mutual promises which fall short of legal obligations, and rest on obligations of either honor or self-interest, or perhaps both.'' This case was followed in Appleson v. Littlewood [1939] 1 All.E.R. 464 (C.A.) and Jones v. Vernon Pools Ltd., [1938] 2 All.E.R. 464.

See Restatement (Second) of Contracts § 21 comment b.

In Nice Ball Bearing Co. v. Bearing Jobbers, 205 F.2d 841 (7th Cir.1953) , cert. denied, 346 U.S. 911 , oral evidence was reviewed at length. It was held to show that a written instrument in the form of a contract for the sale of stock was intended only as a sham and was inoperative.

The application of the ''parol evidence rule'' in these cases is discussed at length hereafter in Chapter 26, § 577.

(n3)Footnote 3. In Kudrna v. Great Northern Ins. Co., 175 F.Supp. 783 (D.Mont.1959) , a month before expiration of a one-year automobile policy, the insurance agent sent to the insured a renewal policy with bill for a year's premium, saying that if he did not want the insurance coverage to return the policy since cancellation could not be completed without its return. The insured did not reply and did not return the policy. The agent sent a second bill, and was then informed that the policy was lost; but the insured sent his check for $10 saying that he had procured other insurance and to cancel the policy as soon as the $10 became insufficient as premium. After applying the $10 as a short term premium, the insurer cancelled the policy. Thereafter an accident occurred. The court held the insurer not liable. The sending of the one-year renewal policy was an offer that was never accepted. Even if both the insurance agent and the insured thought that the policy was in effect and could not be cancelled without its return, their erroneous assumptions did not supply the element of mutual assent.

''If a person offers to another the making of a contract he is bound by the offer, unless he has excluded this obligation.'' German Civil Code, sec. 145.

(n4)Footnote 4. See Hutton v. Watling, [1948] 1 All E.R. 803 (C.A.), where the defendant prepared, signed, and stamped a document containing terms of purchase and sale, including an option to buy certain land, and delivered it to the plaintiff. The latter received it and made payments under it, understanding it to be intended as an integration of contract, as the defendant had reason to know. An integrated contract was held to exist, in spite of the defendant's efforts to show that he intended the document to be only a preliminary memorandum.

(n5)Footnote 5.

S.D. - Mitzel v. Hauck, 78 S.D. 543, 105 N.W.2d 378 (1960) , agreement between two young men to go on a hunting trip and that they should go in A's car rather than in B's.

The absence of an intention to create legal relations may be evidenced in various ways. In Balfour v. Balfour, [1919] 2 K.B. 571 , Atkin L.J., said: ''There are agreements which do not result in contracts... The ordinary example is where two parties agree to take a walk together, or where there is an offer and acceptance of hospitality... One of the most usual forms of agreement which does not constitute a contract appears to me to be the arrangements which are made between husband and wife... They are not contracts, because the parties did not intend that they should be attended by legal consequences.''

It is rare that an action is brought for breach of a social agreement. Occasional news reports about such cases indicate a distinct lack of success by plaintiffs. One such case is reported in L. Ledbetter, Vain Hope Remain Thus for Admirer Who Sued, New York Times, 7/30/78. A man sued the woman with whom he had a theater date. She stood him up.

The Jewish marriage agreement known as the Ketubah creates no legal relations. It is understood by modern participants to be a symbolic ritual rather than a contract. In re White's Estate, 78 Misc.2d 157, 356 N.Y.S.2d 208 (1974) .

See Restatement (Second) of Contracts § 21 comment c.

(n6)Footnote 6. In Tilbert v. Eagle Lock Co., 116 Conn. 357, 165 A. 205 (1933) , the defendant established a group insurance plan for its workmen, and issued a Benefit Certificate to each one, providing for certain payments in case of death while in defendant's employ. The certificate stated: ''This benefit plan being voluntary ... it is understood that it constitutes no contract ... and confers no legal rights, ... We reserve the right to discontinue these benefits at any time without any liability on our part.'' It was further stated that the certificate should not affect the privilege of quitting work or of dismissal from employ. The court held that this created a contractual right, conditional on death while in defendant's employ before any notice of discontinuance of the plan. A notice of discontinuance, after such death, did not prevent liability to the beneficiary.

Tilbert was followed in Novack v. Bilnor Corp., 26 A.D.2d 572, 271 N.Y.S.2d 117 (1966) , where in the face of a statement that the promise was non-binding, the court found a unilateral contract.

An express provision that an employer's certificate, stating that a beneficiary would receive a stated sum in the event of employee's death while still in service, shall be understood to be ''purely gratuitous'' and shall create ''no legal obligation'' and shall be revocable at any time, was held to be an enforceable contract in favor of the beneficiary after the employee's death while in service. The limitation on its legal operation was interpreted to be applicable only during the employee's life. Mabley & Carew Co. v. Borden, 129 Ohio St. 375, 195 N.E. 697 (1935) .

Other cases reaching similar results are Hoefel v. Atlas Tack Corp., 581 F.2d 1 (1st Cir.1978) ; Psutka v. Michigan Alkali Co., 274 Mich. 318, 264 N.W. 385 (1936) ; Schofield v. Zion's Coop. Mercantile Inst., 85 Utah 281, 39 P.2d 342 (1934) .

Kari v. General Motors Corp., 402 Mich. 926, 282 N.W.2d 925 (1978) , reversing 79 Mich.App. 93, 261 N.W.2d 222 . The court remanded to the trial court. Summary judgment should not have been given despite language disclaiming any legal obligation.

In re Streck's Estate, 35 Ill.App.2d 473, 183 N.E.2d 26 (1962) , a partnership agreement provided that in case of death of one partner the survivor should have for one year an option to buy the deceased partner's share at a stated price. This was held to be sufficiently definite and not unconscionable. The agreement further provided that if anyone brought the surviving partner into court, in any proceeding, the share or shares of such person would be forfeited to the surviving partner. The court held that this provision was contrary to public policy and void because its ''object is to oust the jurisdiction of the courts.'' This reasoning is not sound if the parties intended that their agreement should create only a moral obligation and not a legal one, in which case the option to purchase would fall with the rest. Obviously, the parties did not intend this result. When parties intend a legally effective contract, they cannot effectively exclude the applicable legal remedies. The court properly held that the invalidity of this provision did not affect the enforceability of the principal terms of the contract. The contract was ''divisible'' in this respect. The parties had attempted to penalize a party for making an effort to enforce a contract that they intended to be otherwise legally effective. See also § 1432.

In Edwards v. Skyways Ltd., [1964] 1 W.L.R. 349, 1 All.E.R. 494 (Q.B.), the defendant had discharged several pilots as an economy measure. Under the terms of a pre-existing collective agreement, discharged pilots had an option to withdraw their contributions to the pension fund or leave them in and draw a pension at a certain age. Defendant promised to pay discharged pilots who adopted the former course of action ''ex gratia'' a sum approximating the defendant's approximate contributions to the fund. Plaintiff complied but defendant refused to make the agreed upon payment. Held, the promise to pay was enforceable, defendant having failed to carry the burden of proving that no legal effect was intended where the subject matter of the agreement concerned business relations. The words ''ex gratia'' were held to constitute a denial of pre-existing liability rather than a denial of future liability under the agreement.

See Restatement (Second) of Contracts § 21 comment b.

(n7)Footnote 7. L. Fuller, Consideration and Form, 41 Colum.L.Rev. 799, 811 n. 16 (1941).

(n8)Footnote 8. G.H.L. Fridman, Freedom of Contract, 2 Ottawa L.Rev. 1, 5-6 (1967).

(n9)Footnote 9. 412 F.2d 1128 (D.C.Cir.1969) .

In McDonald v. Mobil Coal Producing, Inc., 820 P.2d 986 (Wyo.1991) , an employment manual's disclaimer of contractual intent was not given effect because the disclaimer was not conspicuous.

(n10)Footnote 10. The Restatement (Second) of Contracts § 21 comment b, in the context of disclaimers of intention to be bound, states ''where a bargain has been fully or partly performed on one side, a failure to perform on the other side may result in unjust enrichment, and the term may then be unenforceable as a provision for a penalty or forfeiture... In other cases the term may be unenforceable as against public policy because it unreasonably limits recourse to the courts or as unconscionably limiting the remedies for breach of contract.''

(n11)Footnote 11. See Rose and Frank v. Crompton, quoted above; Schott v. Westinghouse Elec. Corp., 436 Pa. 279, 259 A.2d 443, 40 A.L.R.3d 1404 (1969) noted 74 Dick.L.Rev. 798 (1970); 31 U.Pitt.L.Rev. 742 (1970).

(n12)Footnote 12. McNevin v. Solvay Process Co., 32 A.D. 610, 617 (1898) (Green, J., dissenting), affirmed 167 N.Y. 530, 60 N.E. 1115 (1901). The Pension Reform Act of 1974 curtailed the abuse condemned by the dissenting judge and condoned by the holding in the majority opinion. Employment Retirement Income Security Act of 1974 § 2(c), 88 Stat. 829.

(n13)Footnote 13. ''[P]artnership transactions are disguised as loan transactions to protect financiers from partnership liability; mortgages are disguised as conveyances in an attempt to provide greater security to the creditor; usurious loans are masked as sales with repurchase rights; and schemes to confound the tax-collector are legion. In situations like this the common law is often willing to look behind the transaction ...'' Joseph M. Perillo, The Statute of Frauds in the Light of the Functions and Dysfunctions of Form, 43 Fordham L.Rev. 39, 52 (1974) (footnotes omitted).

(n14)Footnote 14.

Conn. - Davis v. Davis, 119 Conn. 194, 175 A. 574 (1934) .

Ky. - Smith v. Richardson, 104 S.W. 705, 31 Ky.L.R. 1082 (1907) .

N.J. - McClurg v. Terry, 21 N.J.Eq. 225 (1870) .

N.Y. - Graves v. Northern N.Y. Pub. Co., 260 App.Div. 900, 22 N.Y.S.2d 537 (1940) , mot. granted, 285 N.Y. 547, 32 N.E.2d 832 , apparent offer of $1,000 to anyone who would give the telephone number of the Western Union, published in a ''joke column.''

Pa. - Theiss v. Weiss, 166 Pa. 9, 31 A. 63 (1895) .

Vt. - Bruce v. Bishop, 43 Vt. 161 (1870) .

Paulus, Digest, XLIV, 7, 3, § 2.

German Civ.Code, Sec. 118.

In Keller v. Holderman, 11 Mich. 248, 83 Am.Dec. 737 (1863) , Holderman sued Keller upon a check for $300 ''given for an old silver watch, worth about $15, which Keller took and kept till the day of trial, when he offered to return it to the plaintiff, who refused to receive it. The whole transaction was a frolic and banter-the plaintiff not expecting to sell; nor the defendant intending to buy the watch at the sum for which the check was drawn.'' A judgment for the plaintiff was reversed on appeal because ''no contract was ever made.''

In spite of definite words of agreement, the surrounding facts and the actions and intonations of the parties may show that the transaction was a joke. There may be enough evidence of this to go to the jury. Actions may speak louder than and contrary to the words. Chiles v. Good, 41 S.W.2d 738 (Tex.Civ.App.1931) , rev'd, 57 S.W.2d 1100 (Tex.Com.App.) .

(n15)Footnote 15. In Plate v. Durst, 42 W.Va. 63, 24 S.E. 580 (1896) , the defendant promised plaintiff $1,000 and a diamond ring if she would stay in his service. He now claims this was said in jest. The court said: ''Jokes are sometimes taken seriously by the young and inexperienced in the deceptive ways of the business world, and if such is the case, and thereby the person deceived is led to give valuable services in the full belief and expectation that the joker is in earnest, the law will also take the joker at his word, and give him good reason to smile.'' See, to the same effect: Nyulasy v. Rowan, 17 Vict. L. R. 663 (1891); Theiss v. Weiss, supra.

In Lucy v. Zehmer, 196 Va. 493, 84 S.E.2d 516 (1954) , a purchaser was given a decree for specific performance of a contract for sale of land, even though the vendor asserted that it was entered into as a joke. The trial court had refused enforcement; but this was reversed because the record fully convinced the court that the purchaser understood the defendant's offer to be made seriously and had no reason to understand otherwise.

(n16)Footnote 16. In Higgins v. Lessig, 49 Ill.App. 459 (1893) , the jury's verdict was for the plaintiff, but the court of appeal set this aside giving its own interpretation of the facts to the effect that the plaintiff was not justified in taking the defendant's blustering expressions as an offer to contract.

In De Witte v. Calhoun, 221 Cal.App.2d 473, 34 Cal.Rptr. 491 (1963) , the parties to an oral agreement had a row in which language was uninhibited. Then they made an agreement in writing, one that was followed by conflict and litigation. The court held that the evidence did not show an abandonment of all rights under the antecedent oral contract. The court said: ''Except as subsequent conduct breathes life into them, mere intemperate words used in negotiation are not to be taken as a final agreement. It is clear that neither plaintiff nor Calhoun regarded their mutual expressions of disesteem as being more than preliminary skirmishing leading to an ultimate adjustment.''

(n17)Footnote 17. Barnes v. Treece, 15 Wash.App. 437, 549 P.2d 1152 (1976) . See § 3.10 below.

(n18)Footnote 18.

U.S. - New York Trust Co. v. Island Oil & Transport Corporation, 34 F.2d 655 (2d Cir.1929) . ''The standard is what a normally constituted person would have understood them to mean, when used in their actual setting. In the case at bar it is abundantly clear that no such person, making the records here in question in such a background, would have supposed that they represented actual sales of oil; that is, commercial transactions.'' This case was cited and followed in the similar case of In re H. Hicks & Son, 82 F.2d 277 (2d Cir.1936) . And see also Zell v. American Seating Co., 138 F.2d 641 (2d Cir.1943) , rev'd, 322 U.S. 709 . See also United States v. Aetna Casualty & Surety Co., 480 F.2d 1095 (8th Cir.1973) . This view was rejected in Kergil v. Central Oregon Fir Supply Co., 213 Or. 186, 323 P.2d 947, 71 A.L.R.2d 378 (1958) . Also § 577 and notes.