- •Contents
- •Preface
- •1. Goals, Tasks, and Theories
- •1.1. Goals of Contract Interpretation
- •1.1.1. The Contractual Freedoms
- •1.1.2. Other Goals
- •1.2. Tasks in Contract Interpretation
- •1.2.1. Unambiguous Terms
- •1.2.2. Kinds of Ambiguous Terms
- •1.2.3. Resolving Ambiguities
- •1.2.4. The Limits of Parties’ Intention
- •1.3. Theories of Contract Interpretation
- •1.3.1. Literalism
- •1.3.2. Objectivism
- •1.3.3. Subjectivism
- •2. The Elements
- •2.1. Literalist Elements
- •2.1.1. The Words of the Contract
- •2.1.2. Dictionaries
- •2.1.3. Literalism and Context
- •2.2. Objectivist Elements
- •2.2.1. The Whole Contract
- •2.2.2. Objective Circumstances
- •2.2.3. Purpose(s)
- •2.2.4. Ordinary Meanings
- •2.2.5. Trade Usages and Customs
- •2.2.7. Practical Construction (Course of Performance)
- •2.3. Subjectivist Elements
- •2.3.1. Prior Course of Dealing
- •2.3.2. The Course of Negotiations
- •2.3.3. A Party’s Testimony as to Its Intention
- •2.3.4. Subjective Circumstances
- •2.4. Guides to Interpretation
- •2.4.1. “Standards of Preference in Interpretation”
- •2.4.2. Canons of Interpretation
- •2.4.3. Good Faith in Interpretation
- •2.5. Relevant Non-Interpretive Rules
- •3. Identifying the Terms
- •3.1. The Parol Evidence Rule
- •3.1.1. Statement of the Rule
- •3.1.2. Goals of the Rule
- •3.2. Integrated Written Contracts
- •3.2.1. Writings and Electronic Records
- •3.2.2. Kinds of Integrated Agreements
- •3.2.3. Establishing a Document’s State of Integration
- •3.3. Non-Consequences of Integration
- •3.3.1. Collateral Agreements
- •3.3.2. Formation, Invalidating Causes, and Conditions
- •3.3.3. Finding and Resolving Ambiguity
- •4. The Ambiguity Question
- •4.1. The Nature of Ambiguity
- •4.2. The Law of Ambiguity
- •4.2.1. The Plain Meaning and Four Corners Rules
- •4.2.2. Decision Procedures
- •4.2.3. Judge and Jury
- •4.2.4. The Parol Evidence Rule Distinguished
- •4.3. Unambiguous Contracts
- •4.3.1. Literal Meaning of a Word or Phrase
- •4.3.2. The Plain Meaning of a Document
- •4.3.3. Extrinsic Evidence
- •4.4. Ambiguous Contracts
- •4.4.1. Term Ambiguity
- •4.4.2. Sentence Ambiguity
- •4.4.3. Structural Ambiguity
- •4.4.4. Vagueness
- •4.5. No Need to Find Ambiguity?
- •4.5.1. Corbin
- •4.5.2. The Restatement (Second) of Contracts
- •4.5.3. The Uniform Commercial Code
- •4.6.1. Subjectivist Criticisms
- •4.6.2. Objectivist Rejoinders
- •5. Resolving Ambiguities
- •5.1. The Roles of Judge and Jury
- •5.1.1. Question of Law or Fact?
- •5.1.2. Literalism, Judge, and Jury
- •5.1.3. Objectivism, Judge, and Jury
- •5.1.4. Subjectivism, Judge, and Jury
- •5.1.5. Jury Instructions
- •5.2. Judicial Resolution of Ambiguity
- •5.2.1. Ordinary Meanings
- •5.2.2. The Whole Contract
- •5.2.3. The Course of Negotiations
- •5.2.4. The Circumstances
- •5.2.5. Purpose(s)
- •5.2.6. Statements of the Parties’ Intention or Understanding
- •5.2.7. Trade Usages and Customs
- •5.2.8. Course of Dealing
- •5.2.9. Practical Construction (Course of Performance)
- •5.2.10. Statutes and Judicial Precedents
- •5.2.11. Standardized Agreements
- •5.2.12. Reasonableness, Lawfulness, and Fairness
- •5.3. Non-Existent or Ambiguous Contexts
- •5.3.1. Default Rules
- •5.3.2. Interpretation Against the Drafter
- •5.3.3. No Agreement
- •5.4. Special Kinds of Contracts
- •5.4.1. Insurance Contracts
- •5.4.2. Others
- •6. Objective Contextual Interpretation
- •6.1. The Three Tasks in Contract Interpretation
- •6.1.1. Identifying Contract Terms
- •6.1.2. The Question of Ambiguity
- •6.1.3. Resolving Ambiguity
- •6.2. Pluralism, Economic Analysis, and Conventionalism
- •6.2.1. Pluralist and Monist Theories
- •6.2.2. Economic Analysis
- •6.3.3. The Conventions of Language Use
- •6.3. Summary of Major Points
- •Index
ELEMENTS OF
CONTRACT INTERPRETATION
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ELEMENTS OF
CONTRACT INTERPRETATION
STEVEN J. BURTON
1
1
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Copyright © 2009 by Oxford University Press, Inc.
Published by Oxford University Press, Inc.,
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All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior permission of Oxford University Press Inc.
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Library of Congress Cataloging-in-Publication Data
Burton, Steven J.
Elements of contract interpretation / Steven J. Burton. p. cm.
Includes bibliographical references and index. ISBN 978-0-19-533749-5 ((hardback) : alk. paper)
1.Contracts—United States—Interpretation and construction. I. Title. KF801.B875 2009
346.7302—dc22
2008032375
_____________________________________________
1 2 3 4 5 6 7 8 9
Printed in the United States of America on acid-free paper
Note to Readers
This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is based upon sources believed to be accurate and reliable and is intended to be current as of the time it was written. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Also, to confirm that the information has not been affected or changed by recent developments, traditional legal research techniques should be used, including checking primary sources where appropriate.
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For Zachary Pan, Julio Stier, Noah Stier, and Kestrel Stier
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CONTENTS
Preface xi |
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1. Goals, Tasks, and Theories |
1 |
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§ 1.1. Goals of Contract Interpretation |
1 |
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§ 1.1.1. The Contractual Freedoms |
3 |
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§ 1.1.2. Other Goals |
7 |
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§ 1.2. Tasks in Contract Interpretation |
8 |
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§ 1.2.1. Unambiguous Terms |
9 |
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§ 1.2.2. Kinds of Ambiguous Terms |
12 |
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§ 1.2.3. Resolving Ambiguities |
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14 |
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§ 1.2.4. The Limits of Parties’ Intention 15 |
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§ 1.3. Theories of Contract Interpretation |
17 |
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§ 1.3.1. Literalism |
17 |
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§ 1.3.2. Objectivism |
21 |
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§ 1.3.3. Subjectivism 28 |
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2. The Elements 35 |
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§ 2.1. Literalist Elements |
36 |
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§ 2.1.1. The Words of the Contract |
37 |
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§ 2.1.2. Dictionaries |
38 |
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§ 2.1.3. Literalism and Context |
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38 |
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§ 2.2. Objectivist Elements |
41 |
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§ 2.2.1. The Whole Contract |
41 |
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§ 2.2.2. Objective Circumstances |
42 |
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§ 2.2.3. Purpose(s) |
44 |
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vii
VIII |
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§ 2.2.4. Ordinary Meanings |
45 |
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§ 2.2.5. Trade Usages and Customs |
47 |
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§ 2.2.6. Legal Precedents and Statutory Definitions |
48 |
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§ 2.2.7. Practical Construction (Course |
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of Performance) 50 |
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§ 2.3. Subjectivist Elements |
51 |
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§ 2.3.1. Prior Course of Dealing |
52 |
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§ 2.3.2. The Course of Negotiations |
54 |
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§ 2.3.3. A Party’s Testimony as to Its Intention 56 |
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§ 2.3.4. Subjective Circumstances |
56 |
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§ 2.4. Guides to Interpretation |
57 |
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§ 2.4.1. “Standards of Preference in Interpretation” |
57 |
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§ 2.4.2. Canons of Interpretation |
59 |
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§ 2.4.3. Good Faith in Interpretation |
60 |
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§ 2.5. Relevant Non-Interpretive Rules |
61 |
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3. Identifying the Terms 63 |
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§ 3.1. The Parol Evidence Rule |
63 |
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§ 3.1.1. Statement of the Rule |
64 |
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§ 3.1.2. Goals of the Rule |
69 |
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§ 3.2. Integrated Written Contracts |
70 |
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§ 3.2.1. Writings and Electronic Records |
71 |
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§ 3.2.2. Kinds of Integrated Agreements |
74 |
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§ 3.2.3. Establishing a Document’s State of Integration 77 |
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§ 3.3. Non-Consequences of Integration |
93 |
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§ 3.3.1. Collateral Agreements |
94 |
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§ 3.3.2. Formation, Invalidating Causes, and |
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Conditions |
97 |
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§ 3.3.3. Finding and Resolving Ambiguity |
103 |
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4. The Ambiguity Question 105 |
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§ 4.1. The Nature of Ambiguity |
106 |
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§ 4.2. The Law of Ambiguity |
109 |
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§ 4.2.1. The Plain Meaning and Four Corners Rules |
109 |
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§ 4.2.2. Decision Procedures |
111 |
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C O N T E N T S |
IX |
§ 4.2.3. Judge and Jury |
118 |
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§ 4.2.4. The Parol Evidence Rule Distinguished |
120 |
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§ 4.3. Unambiguous Contracts |
122 |
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§ 4.3.1. Literal Meaning of a Word or Phrase |
123 |
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§ 4.3.2. The Plain Meaning of a Document |
126 |
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§ 4.3.3. Extrinsic Evidence |
128 |
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§ 4.4. Ambiguous Contracts |
134 |
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§ 4.4.1. Term Ambiguity |
134 |
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§ 4.4.2. Sentence Ambiguity |
134 |
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§ 4.4.3. Structural Ambiguity |
136 |
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§ 4.4.4. Vagueness |
137 |
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§ 4.5. No Need to Find Ambiguity? 138 |
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§ 4.5.1. Corbin |
138 |
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§ 4.5.2. The Restatement (Second) of Contracts |
139 |
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§ 4.5.3. The Uniform Commercial Code 140 |
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§ 4.6. Criticisms of the Plain Meaning and Four |
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Corners Rules |
143 |
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§ 4.6.1. Subjectivist Criticisms |
144 |
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§ 4.6.2. Objectivist Rejoinders |
146 |
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5. Resolving Ambiguities |
151 |
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§ 5.1. The Roles of Judge and Jury |
152 |
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§ 5.1.1. Question of Law or Fact? 152 |
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§ 5.1.2. Literalism, Judge, and Jury 155 |
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§ 5.1.3. Objectivism, Judge, and Jury |
156 |
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§ 5.1.4. Subjectivism, Judge, and Jury |
157 |
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§ 5.1.5. Jury Instructions |
157 |
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§ 5.2. Judicial Resolution of Ambiguity |
158 |
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§ 5.2.1. Ordinary Meanings |
159 |
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§ 5.2.2. The Whole Contract |
162 |
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§ 5.2.3. The Course of Negotiations |
165 |
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§ 5.2.4. The Circumstances |
168 |
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§ 5.2.5. Purpose(s) |
170 |
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§ 5.2.6. Statements of the Parties’ Intention or |
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Understanding |
172 |
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X CONTENTS
§ 5.2.7. Trade Usages and Customs |
173 |
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§ 5.2.8. Course of Dealing |
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176 |
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§ 5.2.9. Practical Construction (Course of |
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Performance) |
178 |
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§ 5.2.10. Statutes and Judicial Precedents |
180 |
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§ 5.2.11. Standardized Agreements 181 |
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§ 5.2.12. Reasonableness, Lawfulness, and Fairness |
182 |
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§ 5.3. Non-Existent or Ambiguous Contexts |
186 |
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§ 5.3.1. Default Rules |
186 |
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§ 5.3.2. Interpretation Against the Drafter |
187 |
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§ 5.3.3. No Agreement |
188 |
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§ 5.4. Special Kinds of Contracts |
189 |
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§ 5.4.1. Insurance Contracts |
189 |
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§ 5.4.2. Others 191 |
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6. Objective Contextual Interpretation |
193 |
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§ 6.1. The Three Tasks in Contract Interpretation |
194 |
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§ 6.1.1. Identifying Contract Terms |
195 |
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§ 6.1.2. The Question of Ambiguity |
203 |
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§ 6.1.3. Resolving Ambiguity |
211 |
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§ 6.2. Pluralism, Economic Analysis, and Conventionalism |
214 |
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§ 6.2.1. Pluralist and Monist Theories |
214 |
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§ 6.2.2. Economic Analysis |
218 |
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§ 6.3.3. The Conventions of Language Use |
220 |
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§ 6.3. Summary of Major Points |
223 |
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Index 227