FORT LAUDERDALE BUSINESS LITIGATION: AMBIGUOUS TERMS IN COMMERCIAL CONTRACTS

Courts are often tasked with interpreting commercial contracts. Unfortunately, contracts sometimes contain terms that do not clearly convey the intent of the contracting parties. Courts consider these terms as “ambiguous” for purposes of contract interpretation in commercial litigation. Generally, an agreement is ambiguous under Florida law if, as a whole or by its terms and conditions, it can reasonably be interpreted in more than one way. Fla. Power & Light Co. v. Hayes, 122 So. 3d 408 (Fla. 4th DCA 2013). Contractual ambiguities are either “patent” or “latent.” Patent ambiguities “are on the face of the document, while latent ambiguities do not become clear until extrinsic evidence is introduced and requires parties to interpret the language in two or more possible ways.” Nationstar Mortgage Co. v. Levine, 216 So. 3d 711 (Fla. 4th DCA 2017). Peter Mavrick is a Fort Lauderdale business litigation attorney, and represents clients in business litigation in Miami, Boca Raton, and Palm Beach. The Mavrick Law Firm represents businesses and their owners in breach of contract litigation and related claims of fraud, non-compete agreement litigation, trade secret litigation, trademark infringement litigation, employment law, and other legal disputes in federal and state courts and in arbitration.

A patent ambiguity appears on the face of a contract and arises from the use of defective, obscure, or insensible language. Emergency Assocs. of Tampa, P.A. v. Sassano, 664 So. 2d 1000 (Fla. 2d DCA 1995). Under Florida law, patent ambiguities cannot be resolved by introduction of parol or extrinsic evidence. Landis v. Mears, 329 So. 2d 323 (Fla. 2d DCA 1976). Therefore, when a contract does not clearly indicate the parties’ intention, the court must declare that the patently ambiguous provision is a nullity. See Connelly v. Smith, 97 So. 2d 865 (Fla. 3d DCA 1957).

By contrast, a latent ambiguity exists “where the language employed is clear and intelligible and suggests a single meaning, but some extrinsic fact or extraneous evidence creates a necessity for interpretation or a choice among two or more possible meanings.” Ace Elec. Supply Co. v. Terra Nova Elec., Inc., 288 So. 2d 544 (Fla. 1st DCA 1973). “[W]hen a contract is rendered ambiguous by some collateral matter, it has a latent ambiguity, and the court must hear parol evidence to interpret the writing properly.” RX Solutions, Inc. v. Express Pharmacy Servs., Inc., 746 So. 2d 475 (Fla. 2d DCA 1999). A latent ambiguity is thus brought to light when extraneous circumstances reveal “an insufficiency in the contract not apparent from the face of the document.” Hunt v. First Nat’l Bank, 381 So. 2d 1194 (Fla. 2d DCA 1980).

A significant difference between patent and latent ambiguities is that extrinsic evidence is normally indmissible to construe a patent ambiguity because the admittance of such evidence “would allow a trial court to rewrite a contract with respect to a matter the parties clearly contemplated when they drew their agreement.” Emergency Assocs. of Tampa, P.A., 664 So. 2d 1000 (Fla. 2d DCA 1995). On the other hand, “‘[e]xtrinsic evidence . . is admissible to explain a latent ambiguity’ . . . because doing so ‘is but to remove the ambiguity by the same kind of evidence as that by which it is created.’” Mac–Gray Servs., Inc. v. Savannah Assocs. of Sarasota, LLC, 915 So. 2d 657 (Fla. 2d DCA 2005).

There is also an exception to the general rule against extrinsic evidence that applies where the patent ambiguity concerns identify capacity, or the parties’ relationship with each other. Indeed, Florida courts allow parol evidence regarding identity, capacity, and the parties’ relationship with one another even when the ambiguity exists on the face of the document because the court would not be rewriting the terms of the contract.” Nationstar Mortgage Co. v. Levine, 216 So. 3d 711 (Fla. 4th DCA 2017).

Moreover, contractual ambiguities are usually construed against the drafter of the underlying agreement under Florida law. Berloni S.p.A. v. Della Casa, LLC, 972 So. 2d 1007 (Fla. 4th DCA 2008). But this is not always the case. For example, courts cannot construe a restrictive covenant, such as an employees’ non-solicitation provision, narrowly against the drafter of the contract. Fla. Stat. § 542.335. Thus, it is crucial to understand the subject matter and possible ramifications at the time the contract is actually drafted. Proper contract construction is vital to obtaining a fair and equitable result and avoiding issues with ambiguous terms and conditions.

Peter Mavrick is a Fort Lauderdale business litigation lawyer, and represents clients in Miami, Boca Raton, and Palm Beach. This article does not serve as a substitute for legal advice tailored to a particular situation.