Chapter 27 AMBIGUOUS AGREEMENTS

• Jurisdiction: New York

Chapter Twenty-seven

Ambiguous Agreements

I. Contract Doctrine, the Common Law, and Statutory Law

The primary purpose of a contract is not to serve as a vehicle for litigation but to document the respective rights and obligations of the parties to a particular transaction (and where the agreement has not been reduced to a writing, "a formidable obstacle to its enforcement" is presented).³⁷⁸⁵ It is not in the power of either party acting alone and against the will of the other to destroy or change the agreement.³⁷⁸⁶ Marital agreements are binding contracts subject to principles of contract interpretation and are governed by the same doctrinal principles applicable to other contracts.³⁷⁸⁷ A stipulation of settlement is a contract, enforceable according to its terms.³⁷⁸⁸ It is well settled that parties' obligations as defined by their separation agreement, which is an independent contract, must be construed in accordance with the principles of contract interpretation.³⁷⁸⁹ Courts have declared on countless occasions that it is the responsibility of the court to interpret written instruments.³⁷⁹⁰

Courts enjoy only limited authority to disturb the terms of a separation agreement.³⁷⁹¹ Where a party seeks to enforce the terms of a stipulation, a court must effectuate the parties' intent, just as the court would in a matter where a party seeks enforcement of a contract.³⁷⁹² The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent.³⁷⁹³ Courts should construe contracts so as to give full meaning and effect to the material provisions.³⁷⁹⁴

With limited legislative intervention, contract doctrine is the product of the common law.

II. Interpretation and Construction of an Agreement Distinguished

It is reasonable to infer that parties intend that there be certainty to their agreements.³⁷⁹⁵ Williston on Contracts distinguishes interpretation and construction of contracts:³⁷⁹⁶

Interpretation of a promise or agreement or a term in an agreement is the ascertainment of its meaning by determining the meaning of the words employed. More specifically it is the process of determining from the words and other objective manifestations of the parties what must be done or forborne by the respective parties in order to conform to the terms of their agreements, or to put it another way, what external acts must happen or be performed in order to conform to what the law considers the will of the parties.

While the words interpretation and construction are often treated as synonymous and used interchangeably, it is not only possible, but desirable to draw a distinction. The word "interpretation" is used with respect to the language chosen by the parties to manifest their intent; it is the process of applying the appropriate standards to words the parties have used their in agreement in order to determine the meaning of the words. "Construction," on the other hand, involves the court determining, as a matter of law, not the sense of the words or symbols, but the legal meaning of the entire contract; the word is rightfully used whenever the import of the writing is made to depend upon special sense imposed by law. ³⁷⁹⁷

In short, interpretation involves ascertaining the meaning of contractual words, while construction involves deciding their legal effect. Thus, interpretation of the contractual language is the first step towards proper contract construction—the process which occurs when a court determines the legal effect an agreement will have. As understood in the sense, "construction" is necessarily a question of law, while "interpretation" may be a question of law or fact depending on whether the language of the contract is ambiguous or otherwise requires resorting to ask extrinsic evidence.

The intent of parties, where the language of a writing is ambiguous, constitutes a question of fact.³⁷⁹⁸ Where parties have stipulated that language in an agreement is unambiguous, the appellate court is constrained to review only the language contained within the four corners of the instrument.³⁷⁹⁹

Williston further emphasized:³⁸⁰⁰

It is a generally accepted proposition that where the terms of a writing are plain and unambiguous, there is no room for interpretation or construction, since the only purpose of judicial construction is to remove doubt and uncertainty.

III. Doctrine of Definiteness

It is not uncommon for clauses of marital agreements to sometimes fail to achieve their intended purpose.³⁸⁰¹ The doctrine of definiteness or certainty is well established in contract law. In short, it means that a court cannot enforce a contract unless it is able to determine what in fact the parties have agreed to.³⁸⁰² Definiteness is essential but only as to material terms.³⁸⁰³ If an agreement is not reasonably certain in its material terms, there can be no legally enforceable contract.³⁸⁰⁴ An agreement that did not provide any certainty or limit on the husband's obligation to pay the costs of the apartments was held to lack reasonable certainty in its material terms, and thus could not be a legally enforceable contract.³⁸⁰⁵

Where the offeror, using ambiguous language, reasonably means one thing and the offeree reasonably understands differently, there is no contract.³⁸⁰⁶

In 166 Mamaroneck Avenue Corp. v. 151 East Post Road Corp.,³⁸⁰⁷ the Court of Appeals stated:

[There are] two ways in which the requirement of definiteness can be satisfied in the absence of an explicit contract term: (1) an agreement could contain "a methodology for determining the [missing term] . . . within the four corners of the lease, for a [term] so arrived at would have been the end product of agreement between the parties themselves"; or (2) an agreement could "invite [ ] recourse to an objective extrinsic event, condition or standard on which the amount was made to depend."

A. Intent, Clarity and Predictability

Clarity and predictability are particularly important in the interpretation of contracts.³⁸⁰⁸ On appeal, the standard of review for the Appellate Division is to examine the contract's language de novo because the appellate court's function is to apply the meaning intended by the parties, as derived from the language of the contract in question.³⁸⁰⁹ This rule is not an absolute and can be overcome by other indicia of meaning.³⁸¹⁰ The ultimate goal in contract interpretation is realization and effectuation of the parties' intent. Such intent is to be gleaned not only from the literal language of the agreement, but also from whatever may be reasonably implied therefrom.³⁸¹¹ The fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent.³⁸¹²

The law presumes that the parties understand the import of their contract and that they have the intention which its terms manifest; it is not within the function of the judiciary to look outside of the instrument to get at the intention of the parties and then carry out that intention regardless of whether the instrument contains language sufficient to express it, but their sole duty is to find out what was meant by the language of the instrument.³⁸¹³ The intention of the parties must be sought in the language used. To understand the language we may put ourselves in their place and discern if possible the objects they had in view and the motives which dictated their choice of words. A wider meaning may thereby be disclosed.³⁸¹⁴ In Maxton Builders, Inc. v. Lo Galbo,³⁸¹⁵ the Court of Appeals repeated:

We have previously noted that a court should not depart from its prior holdings unless impelled by the most cogent reasons. This standard is particularly apt in cases involving the legal effect of contractual relations. In fact, when contractual rights are at issue, where it can reasonably be assumed that settled rules are necessary and necessarily relied upon, stability and adherence to precedent are generally more important than a better or even a correct rule of law. ³⁸¹⁶

How interesting the observation by the Court of Appeals in Bensons Plaza v. Great Atlantic & Pacific Tea Co.³⁸¹⁷ and New York State Bankers Association v. Albright.³⁸¹⁸ Bensons Plaza noted that "it is the rare writing that requires no interpretation." New York State Bankers mused: "the words men use are never absolutely certain in meaning: the limitations of finite man and the even greater limitations of his language see to that. It is the rare writing that requires no interpretation."³⁸¹⁹ In Heller v. Pope,³⁸²⁰ the Court of Appeals noted:

Written words may have more than one meaning. "The letter killeth but the spirit giveth life." "Form should not prevail over substance and a sensible meaning of words should be sought." But plain meanings may not be changed by parol, and the courts will not make a new contract for the parties under the guise of interpreting the writing. "The fact that the parties intended their words to bear a certain meaning, would be immaterial were it not for the fact that the words either normally or locally might properly bear such meaning." ³⁸²¹

In Joseph Martin, Jr., Delicatessen, Inc. v. Schumacher,³⁸²² the Court of Appeals observed:

[B]efore the power of law can be invoked to enforce a promise, it must be sufficiently certain and specific so that what was promised can be ascertained. Otherwise, a court, in intervening, would be imposing its own conception of what the parties should or might have undertaken, rather than confining itself to the implementation of a bargain to which they have mutually committed themselves. Thus, definiteness as to material matters is of the very essence in contract law. Impenetrable vagueness and uncertainty will not do. ³⁸²³

In Cobble Hill Nursing Home, Inc. v. Henry and Warren Corp.,³⁸²⁴ the Court of Appeals expanded on the doctrine of definiteness:

Few principles are better settled in the law of contracts than the requirement of definiteness. If an

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