Courts generally will construe a contract based on the language in the contact alone. This recent appeals court opinion in Florida illustrates how a Court may decide that a contract is ambiguous, so evidence, in addition to the contract language itself will be considered by the Court in interpreting the agreement.

    In TALBOTT v. FIRST BANK FLORIDA, FSB, etc., Case No. No. 4D09-3226 issued March 30, 2011, the Court found a clause on setting a closing date to be ambiguous, such that each party should be able to explain what each intended the agreement to be, rather than construing the contract based on the contract terms alone.

    An addendum dated June 13, 2007 to a real estate sales contract required the buyer to pay deposits in monthly installments, beginning on June 1, 2007 with a $75,000 payment due on or before November 15, 2007.
With regard to a closing date, the addendum stated:

"Seller may require the Closing to occur at any time on or after October 31, 2007 by giving 120 days written notice to Buyer."

    On August 30, 2007, the seller delivered a closing notice setting a closing date of January 2, 2008-124 days from August 30, 2007. The buyer rejected the notice, claiming that the seller could not issue a notice to close until after October 31, 2007, and that the earliest possible closing date that could be set by the seller was March 1, 2008-120 days from October 31, 2007. The seller claimed that it could send a notice to close at any time so long as the designated closing date was both 120 days from the notice and after October 31, 2007.

Was October 31, 2007 the earliest date the seller could issue a closing notice or the earliest date on which the seller could set the closing?

    The Court said that, where the contract language is clear and unambiguous, a court must apply it as written, even if one of the parties to the contract could prove that the Court's application is not what that party intended when it agreed to those terms. Where, however, contract terms are susceptible to more than one reasonable interpretation, one or both parties may present "extrinsic" evidence, evidence other than the contract language itself, which a court may consider to determine what the parties intended and interpret the contract on that basis. The Court pointed to the fact that, under the seller's view, it could have required a closing prior to the November 15, 2007 deadline for the buyer to make the final installment payment on the deposit (for example, if the 120 day notice had been given on June 13, 2007 after the addendum was signed), which is scenario precluded under the buyer's view. Because each party's interpretation was plausible, the Court found that the contract was ambiguous as to whether the seller could tender a notice of closing prior to October 31, 2007, and schedule a closing date prior to March 1, 2008, and reversed a summary judgment in favor of the seller and requiring a consideration of extrinsic evidence of what the buyer and seller intended under the agreement.