CHAPTER 5

Resolving Ambiguities

After identifying the terms of a contract and determining that the terms are ambiguous in the contested respect, the interpretive task becomes one of resolving the ambiguity to settle the contract’s meaning. There is no simple way to do this, though we could dismiss all cases in which a relevant ambiguity appears, as literalism requires. No jurisdiction does that. In many cases, juries resolve ambiguities. We cannot get inside the jury room, and no known studies test mock juries on questions of contract interpretation. So we can say nothing about jury deliberations here. We will, however, consider the roles of judge and jury, and cases in which judges were the interpreters, focusing on the elements and guides to interpretation that bear on the meaning of a contract or a contract term. These cases provide examples of how an interpreter can use the elements and guides. As a practical matter, they also suggest how advocates can develop relevant facts and make appealing arguments including, by analogy, arguments to juries. It will be seen that the subjective theory dominates the law here.1 In addition, we will consider briefly default rules that do not resolve an ambiguity in the contract language. Rather, these rules

1See Rudman v. Cowles Comm., Inc., 280 N.E.2d 867, 872 (N.Y. 1972); Baladevon, Inc. v. Abbott Laboratories, Inc., 871 F.Supp. 89, 98 (D.Mass. 1994); Hadad v. Booth, 82 So.2d 639, 643 (Miss. 1955); Wick v. Murphy, 54 N.W.2d 805, 808–09 (Minn. 1952); 2 E. ALLAN FARNSWORTH, FARNSWORTH ON CONTRACTS § 7.9 (3d ed. 2004).

151