Three Types of Ambiguity in Transactional Documents

In the June 2016 issue of The Transactional Lawyer, Stephen Sepinuck identifies the three types and focuses on contextual ambiguity. Here are the definitions:

Semantic ambiguity exists when a word or phrase has multiple meanings and more than one of those meanings could reasonably apply. One classic contracts case involved semantic ambiguity in the word “chicken”: was the term in an agreement between a domestic seller and a foreign buyer limited to only young birds suitable for broiling and frying or did it also include older – and less expensive – fowl, best suited for stewing?

Syntactic ambiguity arises from sentence structure, most frequently from the misplacement of a modifier so that it is unclear to what word or phrase a modifying word or phrase refers. For example, a settlement agreement that releases “all claims for the avoidance or recovery of transfers in the amount of $59,999.99 or less” is ambiguous: the specified amount might modify “claims” or “transfers,” and that distinction can matter if a single claim concerns multiple transfers.

Future articles in this series will return to these types of ambiguity and strategies for avoiding them. This article focuses on the third type of ambiguity: contextual ambiguity. Explaining Contextual Ambiguity Contextual ambiguity can arise in two distinct ways. First, it is created when two or more statements or clauses in the same agreement or in related agreements are inconsistent. For example, consider an agreement that calls for “payment of $75,000 in six monthly installments of $15,000.” Six payments of $15,000 will, of course, total $90,000. So, does the agreement require payment of $75,000 or $90,000?

The second method in which contextual ambiguity is created is through the juxtaposition of terms, so that the language of one affects the meaning of another. . . .

You can access The Transactional Lawyer here.

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