What I call “ambiguity of the part versus the whole”—ambiguity involving whether it’s a single member of a group of two or more that’s being referred to, or the entire group—is annoyingly complicated. Whenever I talk about it, I have to remind myself, and those I’m addressing, that we have no choice but to wrestle with this complexity because people fight over plural nouns and the words and, or, every, each, any, and all.
Thanks to the man with his finger on the pulse—Glenn West, of course—I learned, hot off the presses, of Spanski Enterprises, Inc. v. Telewizja Polska S.A., No. 19-4066, 2020 WL 6325842, at *1 (2d Cir. Oct. 29, 2020) (PDF here).
I’ll spare you the details. Here’s the contract section at issue:
The term of this Agreement is 25 (twenty-five) years and it comes into effect on the date of its signing. TVP and SEI may extend its term by subsequent 10 year periods.
The fight was over whether each party could extend the term, or whether they both had to agree to extend the term.
Yes, the second sentence is ambiguous. The Second Circuit agreed with the district court that both parties had to agree, but I’m not particularly interested in who wins this sort of fight. I’m in the business of avoiding fights.
The Second Circuit said the sentence in question “is unambiguous.” I would say instead that considered in isolation, the sentence is ambiguous, but on considering the broader context the court found evidence suggesting that one meaning made more sense than the other.
Assuming that the drafter had intended to express the meaning that ultimately prevailed, here’s one way to say it more clearly: The term of this agreement, as extended in accordance with this section 10.1, will be extended by ten years if the parties so agree in writing.
Here’s how the court dealt with an interesting counterargument:
SEI argues that interpreting Section 10.1 to require mutual agreement renders its extension clause superfluous because the parties would be free to enter into a new mutual agreement even without specifying their ability to do so in the Agreement. See Galli v. Metz, 973 F.2d 145, 149 (2d Cir. 1992) (“Under New York law an interpretation of a contract that has the effect of rendering at least one clause superfluous or meaningless is not preferred and will be avoided if possible.”). But the mutual agreement interpretation suggested by TVP renders the extension provision neither meaningless nor superfluous; under this interpretation, the clause (1) specifies that any extension beyond the initial period is not automatic and must be mutually agreed upon, and (2) sets a standard extension term of 10 years.
The court is unconvincing here. Instead, I would have said it’s routine for parties to say in a contract that specified things will happen if the parties agree to them. Yes, the parties could agree to whatever it is even without saying so in the contract, but saying so allows them to signal that they have those possible outcomes in mind, circumstances permitting.
By the way, I’d love it if courts were aware of chapter 11 of A Manual of Style for Contract Drafting. It’s so far ahead of everything else in dealing with this kind of ambiguity, it isn’t funny.