Even here in the great state of Kansas, handshake deals and gentlemen’s agreements aren’t too common anymore. Small businesses and individuals write and sign a lot of contracts. This is a normal part of doing business or just living life. Down the road, unfortunately, problems between the parties to a contract can surface; and each signatory can find himself or herself looking back at the terms of the contract wondering whether there has been a breach.
Many times contract disputes arise due to differing interpretations of the contract’s terms. One party may have had one understanding and the other party another. The Supreme Court of Kansas has spoken to this issue: “The primary rule for interpreting written contracts is to ascertain the parties’ intent. If the terms of the contract are clear, the intent of the parties is to be determined from the language of the contract without applying rules of construction.” Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 963, 298 P.3d 250, 264 (2013) (quoting Osterhaus v. Toth, 291 Kan. 759, 768, 249 P.3d 888 (2011)).
Ascertaining or determining the parties’ intent, therefore, is crucially important to the interpretation of contract language. If the terms or provisions of a contract are clear and unambiguous, no psychology need apply! In such cases, the intent of the parties is determined from the text or language of the contract itself (i.e., the content within the four corners of the instrument). A court can determine or ascertain the parties’ intent from the text or four corners of, for example, an operating agreement for a limited liability company.
The aforementioned seems cogent and reasonable. What remains to be explored is how a person would know whether terms of a contract are clear and unambiguous. After all, how often is it that one person reads a text and derives one meaning therefrom and another person reads the same text and arrives at a different conclusion?
“Ambiguity in a contract does not appear until two or more meanings can be construed from the contract provisions.” Carrothers Const. Co. v. City of South Hutchinson, 288 Kan. 743, 751, 207 P.3d 231, 239 (2009) (citing Gore v. Beren, 254 Kan. 418, 426-27, 867 P.2d 330 (1994)). This does not mean that a person can whimsically construe a contract provision to mean what he or she wants it to mean. “Before a contract is determined to be ambiguous, the language must be given a fair, reasonable, and practical construction.” Liggatt v. Employers Mut. Cas. Co., 273 Kan. 915, 921, 46 P.3d 1120, 1125 (2002). A “natural and reasonable” interpretation of the contract’s language must be undertaken before finding ambiguity. See Gore v. Beren, 254 Kan. 418, 427, 867 P.2d 330, 337 (1994) (“To be ambiguous, a contract must contain provisions or language of doubtful or conflicting meaning, as gleaned from a natural and reasonable interpretation of its language.” (quoting Simon v. National Farmers Organization, Inc., 250 Kan. 676, Syl. p 2, 829 P.2d 884 (1992))). Lastly, in determining whether a contract is ambiguous, the plain, general, and common meanings of the terms used in the contract are applied and the entire contract is considered and harmonized without isolating any one particular sentence or provision. Cent. Natural Res., Inc. v. Davis Operating Co., 288 Kan. 234, 244-45, 201 P.3d 680, 687 (2009).
The next logical question asked by a party to a contract may be “through whose lenses would these potential ambiguities or differing meanings be viewed?” Does the law consider the opinions of the parties in dispute, or would doing so subject every contract to “ambiguity”? Does a jury play any role in this?
The answer may surprise you. Whether a contractual provision, instrument, or language of a contract is ambiguous or not is a matter or question of law to be decided or determined by the court. E.g., Coble v. Scherer, 3 Kan. App. 2d 572, 575, 598 P.2d 561, 564 (Kan. Ct. App. 1979); Simon, 250 Kan. at 680; Higginbotham Management Co., Inc. v. Cessna Aircraft Co., 281 P.3d 597 (Kan. Ct. App. 2012). In other words, a judge, not a jury, determines whether or not a contract is ambiguous. Just because the parties disagree over the meaning of terms does not establish that a contract is ambiguous. Jones v. Reliable Sec. Incorporation, Inc., 29 Kan. App. 2d 617, 627, 28 P.3d 1051, 1059 (Kan. Ct. App. 2001) (citing Ryco Packaging Corp. v. Chapelle Int’l. Ltd., 23 Kan. App. 2d 30, 36, 926 P.2d 669 (1996), rev. denied 261 Kan. 1086 (1997)).
The court or judge, therefore, determines whether a contract is ambiguous or unambiguous. Assuming the judge decides the latter, he or she will enforce the contract as written. See, e.g., Claasen v. City of Newton, 353 P.3d 469 (Kan. Ct. App. 2015) (“But courts are to enforce unambiguous contracts as they are written and cannot refashion the language to favor a disappointed party’s mistaken expectations.” (citing Quenzer v. Quenzer, 225 Kan. 83, 85, 578 P.2d 880 (1978))); D. R. Lauck Oil Co., Inc., v. Breitenbach, 20 Kan. App. 2d 877, 879, 893 P.2d 286, 288 (Kan. Ct. App. 1995) (“When a contract is not ambiguous, the court may not make another contract for the parties. Its function is to enforce the contract as made.” (citing Patrons Mut. Ins. Ass’n v. Harmon, 240 Kan. 707, 713, 732 P.2d 741 (1987))).
Differing interpretations of contracts are commonplace. You may need to hire an attorney to determine whether there has been a breach, defend an accusation of a breach, or advocate on your behalf in court for the judge to enforce the contract as written. In any of those situations, time is of the essence. The statute of limitations for actions upon oral contracts in Kansas is three years. K.S.A. 60-512(1). Actions upon written contracts in Kansas have a longer statute of limitations of five years. K.S.A. 60-511(1). For transactions in goods (tangible items), the statute of limitations in Kansas for actions for breach of any contract for sale is right in-between: four years. K.S.A. 84-2-725(1).
Here at Kincaid Business & Entrepreneurial Law, LLC ®, we regularly review and write contracts for individuals and businesses. We can help determine whether there has been a breach of contract, defend an accusation of a breach, negotiate a settlement, or fight for a person’s or business’ rights in court. Please contact us at 913-735-7707 if we can be of service to you or your business.
Matthew T. Kincaid