ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Thursday, September 20, 2012

Sometimes a Hyphen is Just a Hyphen

HyphenDid varying hyphen use in a credit swap agreement create an ambiguity?  According to a panel of New York appellate judges (First Department): No, an errant hypen here-or-there does not change the natural meaning of the language.

Here’s a nice summary of the case from the NYLJ (link may require subscription):

Brazilian infrastructure company Concessionaria Do Rodoanel Oeste does not have to pay a termination fee for prepaying $895 million in loans and thereby terminating interest rate swap agreements with investment banks Banco Espirito Santo, Caiza Banco de Investimento and Credit Agricole Corporate Investment Bank, a unanimous appeals panel has ruled in rejecting the banks' argument that the inconsistent use of a hyphen in the swap agreements created ambiguity.

Rodoanel took out $895 million in loans to complete a highway project and hedged them by entering into interest rate swap agreements, a type of derivative, with the banks. Rodoanel decided to pay down the debt before it was due, allowing it to terminate the swap agreements. The banks claimed that Rodoanel owed them a termination fee, called the "Close Out Amount" or "Close-out Amount" in different documents. They said that the differing punctuation created ambiguity about what the term meant, requiring the use of parol evidence in addition to the contracts themselves.

The trial court held that the discrepancy in hyphenation caused an ambiguity and allowed the banks to introduce parol evidence.  The appellate panel reversed and held that the agreement was not ambiguous and that the “ordinary and natural meaning” of the language was dispositive.  It appeared to the court that the banks were attempting to manufacture an ambiguity to effectuate a result that the banks should have provided for in the agreement:

If plaintiffs, who are commercially sophisticated "hedge providers," had intended that, in the event of an early termination, the party "in the money" was entitled to retain the benefits of this favorable market condition, they could easily have expressed this intent in the language of the interest rate swap agreement.

Further, the court wrote that punctuation is a guide in interpreting a contract, but should not be used to contravene the parties’ clearly manifested intent:

Ultimately, this case serves as a reminder that, in a contract containing punctuation marks, the words and not the punctuation guide us in its interpretation (see 17A CJS Contracts §406; 12 AM Jur Contracts §256). Punctuation is always subordinate to the text and is never allowed to control its meaning (Sirvint v. Fidelity & Deposit Co. of Md., 242 App Div 187, 189 [1st Dept. 1934), affd, 266 NY 482 [1934]; see also 17A Jur 2d Contracts §366 [2011]; 68A NY Jur Insurance §869). Of course, punctuation in a contract may serve as a guide to resolve an ambiguity that has not been created by punctuation or the absence therein, but it cannot, by itself, create ambiguity (Wirth & Hamid Fair Booking, Inc. v. Wirth, 265 NY 214 [1934]; see also Stoddart v. Golden, 179 Cal 663, 178 P. 797 [1919]; Randolph v. Fireman's Fund Ins. Co., 255 Iowa 943, 124 NW2d 528 [1963]). It is a cardinal principle of contract interpretation that mistakes in grammar, spelling or punctuation should not be permitted to alter, contravene or vitiate manifest intention of the parties as gathered from the language employed (Sirvint, 242 App Div at 189; Wirth & Hamid Fair Booking, 265 NY at 219).

Banco Espírito Santo, S.A. v. Concessionária Do Rodoanel Oeste S.A., 652013/11, NYLJ 1202571875870, at *1 (App. Div., 1st, Decided September 18, 2012) (link may require subscription to NYLJ).

[Meredith R. Miller]

Recent Cases, True Contracts | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Sometimes a Hyphen is Just a Hyphen:


I like a punctuation-based dispute as much as anyone. No, make that more than anyone! But the banks' argument seems utterly bogus.

Posted by: Ken Adams | Sep 20, 2012 4:12:05 PM

Post a comment

If you do not complete your comment within 15 minutes, it will be lost. For longer comments, you may want to draft them in Word or another program and then copy them into this comment box.