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Contract Disputes: Ambiguity, Vagueness, Reformation

Interpreting contract language is an essential requirement for any commercial/business attorney. It is, further, an important job function of judges. The cardinal rule for interpreting contracts is to ascertain the intention of the parties through the language of the contract and to give effect to that intention. J.E. Hathman, Inc. v. Sigma Alpha Epsilon Club, 491 S.W.2d 261, 264 (Mo. 1973). 

Common issues that arise in the drafting, interpretation, and judicial determination of a contract are ambiguity and vagueness. A contract is ambiguous if its terms are susceptible to more than one meaning so that reasonable people may fairly and honestly differ in their construction. Union Center Redevelopment Corp. v. Leslie, 733 S.W.2d 6, 9 (Mo. App. 1987). A contract is not ambiguous merely because the parties disagree about its meaning. To determine ambiguity, the whole contract is considered and the words are interpreted consistent with their natural and ordinary meaning. Extrinsic/parol evidence — or evidence of the meaning of the contract from things outside the four corners of the contract — cannot be used to create an ambiguity.

Sometimes there is a mistake in the drafting of a contract which, from an outside observer, suggests that the meaning of the contract is something different than the parties intended. Depending on the circumstances, reformation may be an appropriate remedy to correct the mistake. A court, in deciding whether to grant an equitable order reforming a contract, considers many things, including the wording of the contract as signed by the parties, the relationship of the parties, the subject matter of the contract,  the circumstances surrounding the execution of the contract, and its interpretation by the parties.

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