Wednesday, December 14, 2011

Whether a contract is clear or ambiguous makes a difference when it comes to litigation

The question whether there is ambiguity in contractual language impacts the admissibility of evidence outside the contract itself, which could otherwise not be considered under the parol [not parole] evidence rule. But often the parties disagree on whether ambiguity exists and the judge must make the call.
Whether an agreement 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 existing at the time the contract was entered. Coker v. Coker, 650 S.W.2d 391, 394 (Tex. 1983); Ganske v. Spence, 129 S.W.3d 701, 707 (Tex. App.—Waco 2004, no pet.).
An ambiguity does not arise simply because the parties interpret the contract differently. Seagull Energy E & P, Inc. v. Eland Energy, 207 S.W.3d 342, 345 (Tex. 2006); Lopez v. Munoz, Hockema & Reed, L.L.P., 22 S.W.3d 857, 861 (Tex. 2000). A contract is ambiguous when its meaning is uncertain and doubtful or is reasonably susceptible to more than one interpretation. Eland Energy, 207 S.W.3d at 345.
If the agreement can be given a certain or definite legal meaning or interpretation, it is not ambiguous, and we will construe it as a matter of law. Coker, 650 S.W.2d at 393. Moreover, a court will not change a contract merely because the court or one of the parties comes to dislike its provisions or thinks that something else is needed. Calpine Producer Servs., L.P. v. Wiser Oil Co., 169 S.W.3d 783, 787 (Tex. App.—Dallas 2005, no pet.).
We are not allowed to rely on parol evidence to ascertain the meaning of an unambiguous agreement. See Nat’l Union Fire Ins. Co. v. CBI Indus., Inc., 907 S.W.2d 517, 520 (Tex. 1995) (“Parol evidence is not admissible for the purpose of creating an ambiguity. Only where a contract is first determined to be ambiguous may the courts consider the parties’ interpretation . . . and admit extraneous evidence to determine the true meaning of the instrument.”).

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