There are many things you undoubtedly want to accomplish when you enter into a commercial contract. You want to make sure the contract that appears on paper gives you the benefit of the bargain for which you negotiated. You also want to make sure that each of the agreement’s terms is written with the utmost clarity. With no ambiguity, you can be sure you are getting the benefit of the bargain that you wanted. You can also be sure that the pitfall of contract ambiguity doesn’t jump up and “bite” in the event you need to take action in court. To make sure your agreement is totally clear and devoid of ambiguity, be sure you’re relying on an experienced Florida business attorney throughout the contract negotiation and execution process.
How problematic can ambiguity be? Here’s a case from here in South Florida that’s a good example. The owner of a golf course in Hollywood decided to convert the course into residences. The owner signed a “Master Plan Design and Consulting Agreement” with an architect. The contract stated that the architect would receive a base fee of $250,000.
The contract, however, also contained a provision for a bonus to the architect of up to $1.25 million, based upon the architect’s completion of certain tasks. These included getting the neighboring residents to OK the removal of certain restrictive covenants that limited the property’s use to golf or other recreation, as well as gaining approval from the City of Hollywood for the master plan. The paragraph’s final sentence said that the “Bonus Fee shall be earned and payable upon receipt by the Owner of all approvals and permits necessary to develop the property in conformance with the Master Plan developed by Architect for the Project.”
The architect was successful in getting the neighbors to approve removal of the restrictive covenants and also got the required approvals of the plan from the necessary government agencies. As a result, the architect sought payment of the bonus.
A dispute arose and the two sides ended up in court. The architect argued that the bonus provision was clear and that the owner owed the bonus, as the required tasks were completed. The owner argued that the provision was ambiguous and that, in fact, the final sentence in the paragraph added a third requirement – which was securing all approvals and permits necessary to develop the property. This included things like building permits, which the architect had not obtained, according to the owner.
Both sides’ positions were reasonable, so the contract necessarily was ambiguous
The Court of Appeal concluded that the bonus provision was not clear. Quite simply, any time an agreement or agreement provision can reasonably be interpreted in more than one way, then it is ambiguous. In this case, the appeals court considered the arguments that each of the owner and the architect made about the correct way to interpret the agreement. The court decided that each side’s argument had merit. In other words, each side’s interpretation was reasonable, meaning that there were at least two reasonable interpretations of the provision. That made the provision ambiguous and entitled the owner to proceed to trial on its obligation to pay the bonus.
The key thing to take away from this case, perhaps more so than the details of the two sides’ arguments, is the importance of having a genuine “meeting of the minds” before you sign your commercial contract, and making sure what goes down on paper is stated with complete clarity. With a contract drafted to be less ambiguous, both sides potentially could have avoided litigation in this circumstance.
Whether you are negotiating a commercial contract or battling out a contract dispute, you need the right legal team supporting your business interests. Rely on the knowledgeable South Florida attorneys at Stok Kon + Braverman for the helpful advice and effective advocacy you need.
Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.