The rule that ambiguity in contract terms must be construed most strongly against the party that drafted the contract rests on a public policy theory that the party who chose the words is more likely to have provided more carefully for the protection of his own interests, is more likely to have had reason to know of uncertainties, and may have even left the meaning deliberately obscure. Consequently, the rule is usually applied in cases involving an adhesion contract or where one party is in a stronger bargaining position, although it is not necessarily limited to those situations.
Lessor and lessee entered into a rental agreement. The lessor filed this action claiming that lessee failed to comply with the requirements of the lease for developing the property and seeking to recover the difference between the actual fixed rent paid by lessee and the rent recomputed under the terms of the Base Lease. After the superior court concluded that there was no meeting of the minds on the rent escalation provision and thus no binding agreement, both parties appealed.
Was there a meeting of the minds between the parties?
Affirming in part, the court concluded that where the superior court found divergent meanings between the parties, it did not err in concluding that there was no meeting of the minds on the question of what conditions would trigger the retroactive rent escalation. In reversing and remanding in part, however, the court concluded that the superior court erred in awarding judgment for lessee based on the rule that ambiguous contract terms were to be construed against the party drafting the contract where the contract was negotiated between experienced parties who occupied essentially equal positions of power. Lessee would be entitled to a favorable construction if lessor knew that lessee attached a certain meaning to the disputed language and lessee did not know of the meaning attached by lessor. On remand, the superior court was to determine whether lessor knew of the meaning lessee attached to the terms and whether lessee knew of the meaning attached by lessor.