A recent Illinois case, Regency Commercial Assocs., LLC v. Lopax, Inc., 2007 Ill. App. LEXIS 476 (Ill. App. Ct. May 4, 2007), provides a great example of how syntactic ambiguity can really make a mess of a contractual relationship. (Click here for a copy of this case.)
The predecessor of the plaintiff Regency sold to the defendant Lopax land to be used for a Kentucky Fried Chicken restaurant. Regency subsequently wanted to lease another parcel of land nearby to Pictor, a company that planned to open a “Buffalo Wild Wings” restaurant. (For readers outside the U.S., Buffalo wings are fried chicken wings coated in hot sauce. Wikipedia offers further enlightenment.)
Regency filed a complaint for declaratory judgment concerning a restrictive covenant favoring Lopax that was contained in the land sales contract under which Lopax purchased its property. The trial court determined that the restriction covered fast-food restaurants primarily serving chicken and also held that an evidentiary hearing would be necessary to determine if Buffalo Wild Wings was a fast-food restaurant. After that hearing, the court held Buffalo Wild Wings wasn’t a fast-food restaurant and so wasn’t covered by the restrictive covenant. Lopax appealed, but the appellate court affirmed.
Here’s the language at issue:
Seller will not after the date of this agreement sell, lease or permit to be occupied any real estate which Seller owns, manages or otherwise controls within one mile of the Land for the purpose of constructing, or having conducted thereon, any fast food [(quick service restaurant)] restaurant or restaurant facility whose principal food product is chicken on the bone, boneless chicken or chicken sandwiches.
This provision is ambiguous, in that it’s not clear whether “fast food” modifies just “restaurant” or modifies both “restaurant” and “restaurant facility.” (Regarding this kind of syntactic ambiguity, see MSCD 8.120. Syntactic ambiguity arises primarily out of the order in which words appear and how they relate to each other.)
Because of this ambiguity, Regency and Lopax were able to propose different meanings for this provision. Regency argued that the intent of the contract was to prohibit fast food operations that serve primarily chicken, and that because the Buffalo Wild Wings restaurant wasn’t a fast-food restaurant it didn’t fall foul of the restrictive covenant. By contrast, Lopax argued that the fact that the principal food product of the Buffalo Wild Wings restaurant was chicken was all that was required for breach of the restrictive covenant.
In resolving the dispute in favor of Regency, the appellate court, to its credit, looked at both the language of the contract and parol evidence.
To my mind, the language at issue supports Regency’s position. For one thing, if I had wanted to express the Lopax meaning, I would have added “any” before “restaurant facility.” And Lopax’s position—that the provision in effect reads “any fast-food restaurant and any restaurant of any sort”—raises the question why one would bother referring to fast-food restaurants at all, as they would fall within the more general reference to restaurants.
But in order for Regency’s interpretation to work, “restaurant” and “restaurant facility” couldn’t be synonyms. Regency argued that “restaurant” means a stand-alone facility whereas “restaurant facility” means an operation found in a multioutlet food court, embedded in a store, or otherwise not a stand-alone facility. The appellate court accepted that distinction.
Bear in mind that although the appellate court held in favor of Regency, that was after protracted litigation. Presumably at least one of the parties would have preferred to have avoided this dispute. And the intended meaning was sufficiently murky that one judge of the three-judge panel issued a vigorous dissent.
It’s probably just as well, but no one saw fit to mention that further ambiguity could be attributed to the closing modifier “whose principal food product is chicken on the bone, boneless chicken or chicken sandwiches.” Does it modify only “restaurant facility,” or does it also modify “restaurant”? This ambiguity is similar to that in example [59a] in MSCD. And the cumulative effect of opening and closing ambiguities would be analogous to that discussed in MSCD 8.126—in other words, four different meanings are possible.
Ken:
Has it really come to this, when discussing chicken?
“because the Buffalo Wild Wings restaurant wasn’t a fast-food restaurant it didn’t fall foul of the restrictive covenant”
(emphasis added)
:)
One drafting solution would have been to eliminate altogether the reference to “restaurant facility” and to have defined “restaurant” to mean “a stand-alone facility or an operation found in a food court, embedded in a store, or otherwise not a stand-alone facility.” That way, “fast food” would modify the stand-alone facility as well as the non-stand-alones. As would the phrase “whose principal food product is chicken on the bone, boneless chicken or chicken sandwiches.”
I would probably use words other than “stand-alone facility” but for the purpose of illustrating this solution, it’s good enough.