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How Are Contract Ambiguities Resolved?

contract-dispute.jpgMany contract disputes arise over ambiguous terms. If you find yourself in this situation, you need to take swift legal action to protect the interests of your business. An experienced San Jose business contract disputes attorney can help. In many cases, resolving an ambiguity in a contract becomes extremely complex. It is important to understand the basic steps that are required by California law in order to attempt to reach an equitable resolution.

Step One: Comprehensive Contract Review

Once it is established that a true contract ambiguity exists, the first step towards resolving the issue will require a comprehensive review of the language of the contract. This means that, during this part of the review process, courts will only look at the contract itself. California law encourages ambiguities to be resolved without considering outside information whenever possible. California courts will look at the language of the contract and the broader meaning of the contract. This review process will start small. First, the actual sentences that contain the ambiguity will be reviewed. This will be followed by a review of the relevant paragraphs, the specific section of the contract, the whole contract, and finally, any documents that are cited within the contract. The goal is to determine the true intention of the parties by using as narrow an interpretation as possible.

Step Two: External Information

However, it is not always possible to resolve business contract ambiguities by sticking to the language of the contract. If the issue remains after a review of the entire document, external evidence may come into play. This type of evidence is known as 'parol evidence.' Essentially, it includes anything outside of the contract language that could be useful in determining the true intention of the parties. For example, it may include testimony about statements that were made during a negotiation meeting.

Step Three: Who Is at Fault for the Ambiguity?

Finally, some contract ambiguities cannot be resolved by trying to find the true intentions of the parties. In some cases, ambiguities are just inherent within the contract. Both parties simply had a reasonable, and good faith, misunderstanding about the meaning of contract terms. If a dispute reaches this point, the party deemed 'at fault' for the ambiguity will bear the blame. This usually means that the ambiguity will be construed against the party that drafted that section of the contract. This is why it is so critical to ensure that all of your important business contracts are drafted, and reviewed, by an experienced attorney. Ultimately, the best way to resolve contract ambiguities is to catch them before the contract is finalized.

Do You Need Legal Help?

If your business is involved in a dispute over ambiguous contract terms, the experienced San Jose contract litigation attorneys at Diemer, Whitman & Cardosi, LLP are ready to help. Please do not hesitate to contact our San Jose office today at 408-971-6270 to set up a free review of your case. Our firm serves businesses throughout the Bay Area, including in San Francisco and Oakland.

Sources:

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=civ&group=01001-02000&file=1635-1663

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