A contract is supposed to represent the clear and understood intent of two parties to do a thing or not do a thing. It represents two parties who agree on the terms and conditions, the performance obligations, and the risks of the venture. However, due to the complexities of language, business, and human beings in general, we regularly have ambiguity in contracts. Contractual ambiguity arises when there are vague terms [e.g. “buyer will make a good faith effort to obtain their loan”], omissions [e.g. nobody thought about what would happen when the tenant refused to move out], contradictions [e.g. one section says “whenever the contract terminates, Buyer gets their earnest money back,” and another says “whenever the contract terminates, Seller gets to keep the earnest money”] and when there are undefined terms [specialized terms of art are oftentimes the culprit here, such as “contingency,” “final walkthrough,” and “concession”]. Regularly, a term will be used in a way that one party finds absolutely, crystal-clear and obvious, but the other party will disagree. A reasonable time to one person may be a shorter or longer window of time than it is to you.
As a strict baseline, courts will avoid going outside the words on the page of the contract to find meaning. Extrinsic evidence is a last resort when the text doesn’t provide clarity, so private emails, past dealings, and even oral agreements of the parties will oftentimes have no effect on the way the court reads a contract. Courts try to read the contract with its plain meaning unless the contract says otherwise. Courts will rarely read a complex mechanism into a word if a simple mechanism is equally reasonable. For example, “this contract is contingent upon Buyer selling their house.” Contingent, as an adjective, means “dependent on or conditioned by something else.” Read simply, the term means “the contract cannot happen/close until Buyer sells their house.” It does not mean “when the Buyer first notifies Seller that they haven’t been able to find a house yet, the Seller can terminate the contract outright at that moment.” Always critically analyze the words you place in your contracts to ensure they are absolutely and unambiguously clear. If you think it’s possible the language could result in confusion, layer more detail onto the addendum to clarify the original intent. The goal should not be to write the next great American novel in your addenda, but rather to make sure you have provided enough information and detail that there is no possibility of confusion by the other party.