Contract Law For Dummies by Scott J. Burnham

Author:Scott J. Burnham
Language: eng
Format: epub, mobi, pdf
Publisher: Wiley
Published: 2011-11-10T16:00:00+00:00

Chapter 11

Interpreting Contracts

In This Chapter

Understanding the difference between ambiguity and vagueness

Determining whether the language in a contract really is ambiguous

Clearing up ambiguities with the rules of interpretation and other techniques

Dealing with cases in which ambiguity defies interpretation

Contracts consist of words. What the parties meant by the words and phrases they used in stating their agreement is often open to interpretation, which can be somewhat subjective and unreliable. To make contract interpretation more objective, consistent, and predictable, contract law has established certain techniques and guidelines.

As an attorney, you must be able to interpret contracts to figure out what they mean and to write a contract in a way that makes its meaning clear to others. Furthermore, you need to be familiar with the techniques used in contract law to interpret contracts so you’re better equipped to anticipate how judges and juries are likely to rule. This chapter provides the requisite guidance.

Grasping the Basics of Ambiguity

Ambiguity arises when a word or phrase has two or more conflicting meanings. Ambiguity in a contract may lead one party to claim that the language means one thing while the other party says that it means something else. One party usually claims that under its interpretation, the other party is in breach, and the other argues that under its interpretation, it’s not in breach.

For example, a buyer orders “oranges and grapefruit from Florida.” The seller sends grapefruit from Florida but oranges from elsewhere. The buyer claims that the seller is in breach. Here, whether “from Florida” modifies only “grapefruit” or both “oranges and grapefruit” is ambiguous.

In resolving such disputes, the goal of contract interpretation is to carry out what the parties intended. On this point, everyone agrees. But that’s about all they agree on. Courts disagree on how to determine whether language is ambiguous and then, if they find it ambiguous, on how to resolve the ambiguity.

Don’t confuse ambiguity, which is almost always a bad thing, with vagueness, which may be desirable. Vague means uncertain in meaning; however, with vagueness, the intended meaning revolves around a narrow range of meanings rather than the conflicting meanings that often arise with ambiguity. Vague words like reasonable, satisfactory, usual, and promptly are the lawyer’s stock in trade, serving as tools to give one or both parties some breathing room. Here’s an example:

Ambiguous wording: “Notice of defects must be given within 10 days.”

Explicit wording: “Buyer must give notice of defects within 10 days after receipt of the goods.”

Vague wording: “Buyer must give notice of defects promptly after receipt of the goods.”

The first example is ambiguous because it’s not clear who has to give notice — the buyer or the seller. Furthermore, the statement doesn’t say when the 10 days starts running. The explicit wording makes these terms clear. The vague wording uses “promptly” rather than “within 10 days.” The disadvantage of this language is that it’s hard to tell whether a party has complied. The advantage is flexibility, because what is “prompt” may depend on the facts and circumstances or trade usage.

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