When it comes to legal contracts, the language used can be complex and highly specific. Unfortunately, this complexity can sometimes lead to ambiguity in contract terms, which can cause confusion and ultimately lead to disputes and legal battles. In this article, we will explore what happens when there is an ambiguity in a contract term, and what steps can be taken to address the problem.
What is an Ambiguous Contract Term?
An ambiguous contract term is one that is open to more than one interpretation. This can occur for a variety of reasons such as poor drafting, the use of technical language, or an unclear definition of terms. The problem with ambiguity is that it can lead to disputes between the contracting parties, as each party may have a different understanding of what the term means.
What Happens When There is an Ambiguity in a Contract Term?
When there is an ambiguity in a contract term, the first step is for the parties to attempt to resolve the issue through negotiation. This involves discussing the problem and trying to come to an agreement on what the term means. If negotiation is unsuccessful, the parties may need to rely on a court or arbitrator to resolve the dispute.
In many cases, the court or arbitrator will consider extrinsic evidence to help interpret the term. Extrinsic evidence includes any evidence outside of the written contract that can help clarify the intention of the parties. This can include documents, emails, and other communications between the parties. The court or arbitrator will also consider the context of the contract, the nature of the transaction, and industry customs and practices.
If it is determined that the term is ambiguous, the court or arbitrator will attempt to determine the intention of the parties at the time the contract was formed. This may involve looking at the negotiating process, the purpose of the contract, and the business relationship between the parties.
How to Avoid Ambiguity in Contract Terms
To avoid ambiguity in contract terms, it is important to draft the contract with clarity in mind. This involves using plain and simple language, avoiding technical terms and jargon, and defining important terms clearly and comprehensively. It is also important to ensure that the contract is reviewed and understood by all parties before it is signed, and to seek legal advice if necessary.
Conclusion
Ambiguity in contract terms can lead to disputes and legal battles that can be costly and time-consuming. It is important to take steps to avoid ambiguous terms in contracts and to address any ambiguities that do arise through negotiation or legal action if necessary. By taking a proactive approach to contract drafting, parties can ensure that their agreements are clear and enforceable.