Texas Causes of Action & Affirmative Defenses

Texas Causes of Action & Affirmative Defenses

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Thursday, May 26, 2011

Interpreting the fine print: Is the contractual language clear or ambiguous?

How do Texas courts deal with the contention that a contract is ambiguous? 

Whether a contract is ambiguous is a question of law. Heritage Resources, Inc. v. NationsBank, 939 S.W.2d 118, 121 (Tex. 1996). If the contract is so worded that it can be given a certain or definite legal meaning or interpretation, then it is not ambiguous and a court should construe the contract as a matter of law. SAS Institute, Inc. v. Breitenfeld, 167 S.W.3d 840, 841 (Tex. 2005); ACS Investors, Inc. v. McLaughlin, 943 S.W.2d 426, 430 (Tex. 1997). [ The court construes ] an unambiguous contract according to the plain meaning of its express wording. Lyons v. Montgomery, 701 S.W.2d 641, 643 (Tex. 1985). Unambiguous contracts are enforced as written. Heritage Resources, Inc., 939 S.W.2d at 121.
 
WHAT MAKES A CONTRACT AMBIGUOUS?

 “A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation.” Id. However, a contract is ambiguous when its meaning is uncertain and doubtful or it is reasonably susceptible to more than one meaning. Nevarez v. Ehrlich, 296 S.W.3d 738, 742 (Tex.App.--El Paso 2009, no pet.). Not every difference in the interpretation of a contract amounts to an ambiguity. Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 134 (Tex. 1994). Mere disagreement over the meaning of a provision in the contract does not make the terms ambiguous. Richardson Lifestyle Association v. Houston, 853 S.W.2d 796, 800 (Tex.App.--Dallas 1993, writ denied).

Likewise, uncertainty or lack of clarity in the language chosen by the parties is insufficient to render a contract ambiguous. Preston Ridge Fin. Servs. Corp. v. Tyler, 796 S.W.2d 772, 777 (Tex.App.--Dallas 1990, writ denied). Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983).
 
When a contract contains an ambiguity, the granting of a motion for summary judgment is improper because the interpretation of the instrument becomes a fact issue. Id. We determine whether a contract is ambiguous by looking at the contract as a whole in light of the circumstances present when the parties entered the contract. Universal Health Servs., Inc. v. Renaissance Women’s Group, P.A., 121 S.W.3d 742, 746 (Tex. 2003). If a contract is determined to be ambiguous, then a court may consider extraneous evidence to ascertain the true meaning of the instrument. Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex.1995).
 
TWO CATEGORIES OF CONTRACT AMBIGUITY

An ambiguity may be either patent or latent. Id. A patent ambiguity is evident on the face of the contract. Id. A latent ambiguity arises when a contract that is unambiguous on its face is applied to the subject matter with which it deals and an ambiguity appears by reason of some collateral matter. Id. When a contract contains an ambiguity, either patent or latent, the interpretation of the instrument becomes a fact issue. Coker, 650 S.W.2d at 394; Quality Infusion Care, Inc. v. Health Care Service Corp., 224 S.W.3d 369, 379 (Tex.App.--Houston [1st Dist.] 2006, no pet.). The trier of fact [ jury or judge in bench trial ] must resolve the ambiguity by determining the true intent of the parties. Coker, 650 S.W.2d at 394-95.
 
SOURCE: El Paso Court of Appeals - 08-08-00343-CV - 4/20/11

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