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Why Unclear Contract Provisions Go Against the Drafter Under NY Law

This question comes up all the time: What happens when a particular provision within a contract is unclear - or, better yet - if the contract doesn't even address it at all?

Under New York law, the answer to these questions is straightforward: to the extent that the contract provisions are unclear, any doubts are resolved in favor of the party that did not draft the contract.

"Why?" you ask. "Isn't that unfair?"

Not really.

In most cases, the bargaining power on the two sides to an agreement is unequal. And this rule seeks to balance out the equities. Some of the most obvious and common examples is boilerplate agreements in the context of sales agreements, employment agreements or in the real estate context. Simply put, if the drafter of these contracts deems a particular point to be important, they are held responsible to make sure it's in the agreement. And if they don't, they do so at their own peril.

To that end, one of New York's appellate courts, in William A. White/Tishman East, Inc. v. Banko, 171 AD2d 401, 402 summarized the rule as follows:

"any ambiguit[y] in an agreement [is] to be interpreted ‘most strongly against the draftsman' as long as the particular interpretation would not lead to an absurd result..."