From May 2015:
It’s abundantly normal that we think of contracts as something that only occurs in business. But a law professor once told me that if I watched the movies and afterward did not think differently of the subject of contracts, I had learned nothing about the subject. Quite right. The cinema is a microcosm of human relationships crammed in to roughly 120 minutes of one’s life. Actors make promises, agree and guarantee their performance to another party, sealing them with handshakes and kisses. In other words, they make contracts.
Why don’t parties forming contracts explore all the possibilities before signing? I suspect that there is a very human desire to avoid conflict. Further, what party wants to be openly planning for when the matter goes sideways? Additionally, costs may also be a factor since legal counsel should likely be involved. Contracts are marriages of sorts and what party wants to pull out the prenuptial agreement when that party may be on bended knee? But contracts are more than this. They are meant to draw together the wills and understandings of the parties and to clarify the rights and duties of those party. In fact, the term contract gets its lineage from the 14th Century Latin contrahere – meaning to draw together. For almost 700 years, this “drawing together” has been litigated by parties who failed to ask,
“What if?”
The Texas Supreme Court recently addressed such a contract interpretation issue in RSUI Indem. Co. v. Lynd Co. This particular litigation involved the interpretation of the “Scheduled Limit of Liability” in an excess insurance policy whose construction led both parties to construe the clause with entirely opposite but plausible interpretations. This is called an ambiguity, and a true ambiguity will almost always lead to court action if the parties refuse to accommodate one another. Would the time taken to determine the parties collective understanding of possible damage scenarios been worth the cost? Consider the answer for both parties – ten years and several million dollars in costs.
What if?