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Legal Memorandum: Ambiguity of a Contract's Terms

Issue: Under Florida law, how must ambiguity within a contract’s terms be dealt with?

Area of Law: Business Organizations & Contracts
Keywords: Contract's terms; Ambiguity
Jurisdiction: Florida
Cited Cases: 177 So. 2d 712; 760 So. 2d 80; 302 So. 2d 404; 672 So. 2d 592
Cited Statutes: None
Date: 07/01/2008

Florida’s law regarding the construction of contracts dictates that “any ambiguity in the terms should be resolved in favor of upholding the purpose of the agreement and giving effect to every term in the agreement.”  City of Homestead v. Johnson, 760 So. 2d 80, 83 (Fla. 2000). Yet another settled rule of contract construction applicable here is that the court “‘must be guided first by the language of the contract itself and where the contract is clear and unambiguous there is no reason to go further.'”  Cleveland Consol., Inc. v. Haren, 672 So. 2d 592, 594 n.1 (Fla. 1st DCA 1996) (quoting Automatic Canteen Co. of Am. v. Butler, 177 So. 2d 712, 715 (Fla. 3d DCA 1965)).

In Blackhawk Heating & Plumbing Co. v. Data Lease Financial Corp., 302 So. 2d 404 (Fla. 1974), the Florida Supreme Court examined a contract that had some ambiguities, particularly with regard to the amount of cash or cash-flow benefits.  Id. at 407-08.  The court looked to the parties’ negotiations and determined that their intention was that the plaintiffs would receive a credit amounting to 25% of certain of the defendant’s profits.  Id.  The contract was binding notwithstanding that there was some ambiguity about this key term.  Id. at 408.  “Even though all the details are not definitely fixed, an agreement may be binding if the parties agree on the essential terms and seriously understand […]

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