Ambiguity in Contracts: When Language Is Unclear
What Is Ambiguity in a Contract?
Ambiguity exists when a contract term or provision is reasonably susceptible to more than one meaning. It does not mean the language is confusing to a layperson — it means that two reasonable interpretations of the same words are possible, creating uncertainty about what the parties actually agreed to.
Two Types of Ambiguity
Patent Ambiguity
The unclear meaning is apparent from reading the contract itself. The language is visibly confusing, contradictory, or incomplete on its face.
Example: A lease states rent is "$2,000 per month for the first year and $2,500 thereafter" but also states "rent shall not increase during the term." The contradiction is obvious.
Latent Ambiguity
The language appears clear on its face but becomes ambiguous when applied to the actual facts.
Example: A contract to sell "the property on Main Street" seems clear — until it turns out the seller owns two properties on Main Street.
How Courts Resolve Ambiguity
Courts follow a hierarchy of tools:
- Plain meaning — if only one reasonable interpretation exists, that controls
- Context within the agreement — reading the ambiguous term in light of the entire contract
- Course of dealing — how the parties interpreted the term in past transactions
- Trade usage — how the term is understood in the relevant industry
- Contra proferentem — as a last resort, ambiguity is interpreted against the drafter
Protecting Yourself
- Define key terms explicitly in a definitions section
- Avoid shorthand or industry jargon that may have multiple meanings
- Have both parties review and initial any hand-written changes
- Ensure cross-referenced sections are consistent
When to Consult a Lawyer
Consider consulting an attorney if a significant term in your contract could reasonably be read in more than one way, as this ambiguity could become the focus of expensive litigation.
This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.