A Powerful Argument for Attacking Standard Form Contracts -- "Or" is always ambiguous.
If you are fighting a form contract, look for an "or." It is fertile ground to make the interpretation of the contract a jury question.
In SouthTrust Bank v. Copeland One, L.L.C., 2003 WL 22064062 (Ala. 2003), the Supreme Court struck a blow against the inartfully drafted "form contract." It is a welcome opinion for lawyers who can articulate the many potential ambiguities in ordinary language. Its unsettling since, once again, the Supreme Court affirms on grounds different from those that the parties apparently briefed. But, its strong encouragement for everyone fighting against form contracts. It definitely gives the attacker a powerful argument.
SouthTrust had a branch and an ATM at a shopping plaza under two different leases. The branch lease was not renewed, but the ATM lease continued. A competing bank leased the branch location. SouthTrust sued the landlord's for breach of SouthTrust's "standard lease for freestanding ATMs" which stated:
"Exclusive ATM or Bank. Tenant [SouthTrust] shall have the exclusive right during the term of this lease and any renewals to operate an ATM or any other type of banking facility on the Property. "
The parties' briefs focused on whether "banking facility" was ambiguous. The Court disposed of that issue easily finding that the proposed competing branch was clearly a "banking facility." SouthTrust's lawyers were probably smiling at that point in the opinion. But, the Supreme Court injected its own issue, which the SouthTrust lawyers now can only answer on the rehearing petition.
The Court said the exclusivity language was ambiguous because of the "or." Citing considerable authority, the Court said the "or" could have an inclusive meaning (A, or B, or both) or an exclusive meaning (A, or B, but not both). Inclusively, it could mean that SouthTrust had an exclusive right to operate an ATM, or a facility, or both. Exclusively, it could mean that SouthTrust had an exclusive right to operate an ATM, a facility, but not both.
I doubt that the SouthTrust lawyer, while drafting a standard form, ever intended to limit SouthTrust's exclusive rights to either an ATM or a facility, but not both. The lawyer likely intended the clause to give SouthTrust broad protection against competition, consistent with its power to impose a "standard form" on the landlord.
But, the trial court had ruled against SouthTrust finding the exclusivity clause ambiguous. The Supreme Court did not say what evidence of intent was heard ore tenus in the three-day hearing before the trial judge, but it found the "or" ambiguity sufficient to affirm his ruling, and never discussed any evidence, if there was any, about the actual intentions of either SouthTrust or the plaza's landlord.
The opinion's wording and structure comes dangerously close to creating some inflexible rule that the drafter of ambiguous language always loses. However, the opinion recites the rule that once the agreement is found to be ambiguous, its meaning becomes a question of fact.
Often in form contracts, the only evidence of intent will come from the drafter, since the other party never attempted to negotiate terms or read the contract.
I have often wondered how courts should deal with ambiguous language that must be construed against the drafter if there were evidence from the contract drafter that their intent was to limit the rights of the customer to the maximum extent permitted by law. How should instructions to the jury resolve the conflict between a clearly established intention of a single drafter and the rule of contra proferentem?
In the Contract section of the Alabama Pattern Jury Instructions, there is no guidance provided for charging juries that are trying to construe a contract, but in the Insurance section, there is an instruction that "Ambiguous provisions of an insurance policy will be construed most strongly against the insurance company and in favor of the insured." APJI 20.31. I do not recall ever seeing any explanation or instruction as to how the jury should resolve any difference between a construction against the drafter and a construction matching the actual intention of the drafter.
This case gives support to the view that the rule of contra proferentem might control.
In SouthTrust Bank v. Copeland One, L.L.C., 2003 WL 22064062 (Ala. 2003), the Supreme Court struck a blow against the inartfully drafted "form contract." It is a welcome opinion for lawyers who can articulate the many potential ambiguities in ordinary language. Its unsettling since, once again, the Supreme Court affirms on grounds different from those that the parties apparently briefed. But, its strong encouragement for everyone fighting against form contracts. It definitely gives the attacker a powerful argument.
SouthTrust had a branch and an ATM at a shopping plaza under two different leases. The branch lease was not renewed, but the ATM lease continued. A competing bank leased the branch location. SouthTrust sued the landlord's for breach of SouthTrust's "standard lease for freestanding ATMs" which stated:
"Exclusive ATM or Bank. Tenant [SouthTrust] shall have the exclusive right during the term of this lease and any renewals to operate an ATM or any other type of banking facility on the Property. "
The parties' briefs focused on whether "banking facility" was ambiguous. The Court disposed of that issue easily finding that the proposed competing branch was clearly a "banking facility." SouthTrust's lawyers were probably smiling at that point in the opinion. But, the Supreme Court injected its own issue, which the SouthTrust lawyers now can only answer on the rehearing petition.
The Court said the exclusivity language was ambiguous because of the "or." Citing considerable authority, the Court said the "or" could have an inclusive meaning (A, or B, or both) or an exclusive meaning (A, or B, but not both). Inclusively, it could mean that SouthTrust had an exclusive right to operate an ATM, or a facility, or both. Exclusively, it could mean that SouthTrust had an exclusive right to operate an ATM, a facility, but not both.
I doubt that the SouthTrust lawyer, while drafting a standard form, ever intended to limit SouthTrust's exclusive rights to either an ATM or a facility, but not both. The lawyer likely intended the clause to give SouthTrust broad protection against competition, consistent with its power to impose a "standard form" on the landlord.
But, the trial court had ruled against SouthTrust finding the exclusivity clause ambiguous. The Supreme Court did not say what evidence of intent was heard ore tenus in the three-day hearing before the trial judge, but it found the "or" ambiguity sufficient to affirm his ruling, and never discussed any evidence, if there was any, about the actual intentions of either SouthTrust or the plaza's landlord.
The opinion's wording and structure comes dangerously close to creating some inflexible rule that the drafter of ambiguous language always loses. However, the opinion recites the rule that once the agreement is found to be ambiguous, its meaning becomes a question of fact.
Often in form contracts, the only evidence of intent will come from the drafter, since the other party never attempted to negotiate terms or read the contract.
I have often wondered how courts should deal with ambiguous language that must be construed against the drafter if there were evidence from the contract drafter that their intent was to limit the rights of the customer to the maximum extent permitted by law. How should instructions to the jury resolve the conflict between a clearly established intention of a single drafter and the rule of contra proferentem?
In the Contract section of the Alabama Pattern Jury Instructions, there is no guidance provided for charging juries that are trying to construe a contract, but in the Insurance section, there is an instruction that "Ambiguous provisions of an insurance policy will be construed most strongly against the insurance company and in favor of the insured." APJI 20.31. I do not recall ever seeing any explanation or instruction as to how the jury should resolve any difference between a construction against the drafter and a construction matching the actual intention of the drafter.
This case gives support to the view that the rule of contra proferentem might control.
posted by Lewis at 2:45 PM
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