From Caselaw, Cautionary Tales for Contract Drafters

Longtime readers will know that I have no time for the notion of “tested” contract language—instead of continuing to use confusing contract language because a court has had occasion to attribute meaning to it, I prefer to state meaning clearly.

So instead of relying on caselaw to tell me how to draft contracts, I find caselaw mostly useful for the lessons it offers on how not to draft contracts. I consider what contract language created the confusion that led to a given dispute, and I attempt to draw general lessons from it.

But in addition to caselaw in which the dysfunction is to be found in contract language, there’s also caselaw in which the court either contributes to the confusion or finds confusion where there isn’t any. Here are three posts I’ve published in recent days that discuss three such cases and the lesson to be drawn from each:

  • UBS Securities v. Highland Capital (this post): If you include redundancy in your contracts, don’t be surprised if a court attributes unanticipated meaning to it. To avoid that happening, rid your contracts of clutter, even if it seems benign.
  • SuperGuide Corp. v. DirecTV Enterprises, Inc. (this post): Don’t be surprised if a court misdiagnoses potential ambiguity and uses an indefensible analysis to justify its conclusion that the language at issue isn’t ambiguous. To avoid that happening, eliminate ambiguity from your contracts, except for those instances of part-versus-the-whole ambiguity that you’ve decided are unlikely to cause problems (for more on that, see this article).
  • Medfusion, Inc. v. Allscripts Healthcare Solutions, Inc. (this post): Courts have been known to find ambiguity where informed analysis indicates none exists. Want to avoid that happening? Well, you could get on your knees and pray …

Why discuss these cases? I could limit myself to generalizations, but it’s only by examining mistakes that you learn. And courts are public servants, so it’s appropriate to shine a spotlight on their work.

Yes, occasionally I allow myself to have a bit of fun in the process, but don’t assume that I wish to denigrate U.S. courts. All told, I think that they do reasonably well what is a very difficult job. My one general complaint is their approach to expert-witness testimony on ambiguity; I discuss that at the end of my SuperGuide post.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.

3 thoughts on “From Caselaw, Cautionary Tales for Contract Drafters”

  1. Drawing on unassisted memory, I think the rule is that unless a contractual provision is ambiguous, there is no occasion for interpretation, and the plain meaning will apply.

    Stating the meaning of unambiguous contract language is a matter of law, not fact, and an appeals court may undertake it with no deference to the trial court’s reading of the language.

    Determining whether a provision is or is not ambiguous is an analytically different problem. I don’t know or at least don’t remember whether it’s a question of law or fact, or a mixed question of law and fact.

    I do recall that parol evidence will not be admitted to vary the plain meaning of contract language, but will be admitted to demonstrate the existence of a latent ambiguity.

    Against that background, I try so far in vain to figure out whether there’s a proper role for expert opinion concerning ‘ambiguity’.

    First off, in MSCD, ‘ambiguity’ is a narrow category of uncertainty. Is that the sense we’re talking about?

    Next, is the proposed testimony aimed at (1) helping the court discover the presence or absence of ambiguity however defined, (2) helping the court resolve ambiguities once ascertained; (3) both 1 and 2, or (4) something else altogether?

    In my experience, judges tend to think of experts in the same category as persons of negotiable virtue, and the closer the expert’s field to anything the judge knows anything about, the greater the judge’s reluctance to allow testimony that trespasses on judicial turf.

    Just as most lawyers see themselves as above-average drafters, most judges see themselves as superior interpreters of instruments. That’s the state of play.

    • The fact that courts routinely botch analysis of ambiguity or alleged ambiguity is enough for me to suggest that it’s time to allow experts to have their say.

      But my private discussions with judges suggest that it ain’t gonna happen. So I’ll try other approaches.


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