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How New York's Courts Determine if Your Contract is Ambiguous

 

Although there have been several articles written about what happens when a contract, or even a particular important provision in an agreement, is unclear (see, e.g., "What Happens When Your Agreement is Unclear in New York") there is perhaps a more fundamental question that should be answered first:

 

How does a court determine whether the contract is, in fact, ambiguous or unclear?

 

Fortunately, New York's courts have provided some guidance on this issue, stating as follows:

 

Standard for Ambiguity

"It is well settled that a contract is unambiguous if the language it uses has a definite and precise meaning, as to which there is no reasonable basis for a difference of opinion." Lockheed Martin Corp. v. Retail Holdings, N.V., 639 F.3d 63, 69 (2d Cir. 2011). When determining whether a contract is ambiguous, it is important for the court to read the integrated agreement "as a whole." Id. (quoting Law Debenture Trust Co. of N.Y. v. Maverick Tube Corp., 595 F.3d 458,468 (2d Cir. 2010) (internal quotation marks omitted)). If the document as a whole "makes clear the parties' over-all intention, courts examining isolated provisions should then choose that construction which will carry out the plain purpose and object of the [agreement]." Id. (quoting Kass v. Kass, 673 N.Y.S.2d 350, 696 N.E.2d 174, 673 N.Y.S.2d 350 (1998) (internal quotation marks omitted; brackets in original).

 

Truth be told, this language isn't a perfect model of clarity; but, considering that each contract is inherently unique, and must therefore be evaluated on its own, these guidelines are fairly good - or at least as good as can reasonably be expected.