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Is Your Contract Ambiguous?

The concept of defining a contract as being ambiguous is actually a fairly easy rule to recite.  Under Michigan law, a contract term or clause is ambiguous when it is facially inconsistent or its language can be reasonably interpreted in two or more ways. This is the general standard frequently cited by Michigan courts.

In many cases, this standard leaves little room for doubt. The contract means what it says and the parties should leave well enough alone. The unfortunate party who doesn’t follow that advice might lose a court case, or will simply rely upon an erroneous interpretation when performing the contract.  In each case, an expensive lesson will be learned.

There are, however, many cases where contracting parties can and will have a legitimate dispute about the meaning of contractual terms. There are several regularly recurring sources of ambiguity. Inconsistent terms are a common source of contractual ambiguity. For example, in one case the insurance company’s contracts with its agent set two distinct vesting schedules for eligibility to receive a percentage of renewal commissions: (1) upon two or more years of service; and (2) at age 65 or older with ten or more years of service with the company. Klapp v. United Insurance Group Agency, Inc., 468 Mich. 459, 467; 663 N.W.2d 447 (2003).  These clauses were clearly inconsistent, since there was no way to reconcile these terms.

A contract may also be ambiguous because it is silent on a topic, it contains extremely broad language that is subject to multiple interpretations, or it fails to anticipate circumstances that might arise in the performance of the contract. These additional sources of ambiguity have been repeatedly litigated in Michigan cases over the years.

Identifying and interpreting ambiguous contract clauses is one of the most befuddling and least certain areas of contract law, which requires experience and knowledge of the applicable standards to navigate the maze of possibilities.  We have the requisite experience to navigate that maze and assist our clients in avoiding or prevailing in litigation, or just getting the interpretation right in the first place so as to avoid protracted and unsuccessful court cases.

Caution: This article provides general information and is not intended to be legal advice. Your personal circumstances likely vary from those discussed in this article. You should contact Lambert & Lambert PLC if you are seeking specific legal advice as to your contract or circumstances.

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