The contract with one ambiguous word

Two companies spent eleven months in dispute over whether 'days' meant working days or calendar days. The contract used the word fourteen times and defined it once, in a schedule that had been deleted during negotiation.

Ambiguity of this kind is not usually the result of carelessness about language. It is the result of a negotiation in which both sides wanted a different meaning and neither wanted to lose the point, so the word stayed vague and the disagreement was deferred. Drafting lawyers have a name for the practice and a professional opinion about it: deliberate ambiguity postpones a cost and increases it.

When such a case reaches a court, the interpretation is not a search for what either party meant privately. Courts construe a contract objectively, asking what a reasonable person with the background knowledge available to both parties would have understood the words to mean. Private intentions are generally inadmissible, which surprises people who assume that evidence of what they meant should settle it. The rule exists because contracts are relied on by third parties — banks, insurers, buyers of the business — who have access to the document and not to anyone's recollection.

Two drafting habits prevent most of these disputes and cost nothing. Define a term once, in the body rather than a schedule, and resist the urge to vary the wording for elegance: a document that says 'days', 'business days' and 'working days' in three clauses has created three questions. And when a definition is deleted in negotiation, search the document for the defined term, because a definition's removal leaves every use of it behind.

The eventual judgment ran to forty pages and turned on an email about a bank holiday.