Ambiguity, the Nemesis of a Settlement Agreement

The importance of making clear agreements, not subject to other interpretation cannot be emphasized enough. Any apparent ambiguity can open the door to dispute. And then, sometimes even judges disagree on the intended interpretation. So, while agreements between parties to lawsuits is encouraged, it is necessary to ensure that such agreements are drafted in a way that make clear the parties’ intentions and that deal with all the nuances of the agreement.

Case details

A specific case where a husband and wife disputed the meaning of their settlement agreement serves as an example. In this particular case, according to their property settlement, the husband agreed to give the wife a real estate commission of $25,000 that he had previously earned through the sale of certain ranch property. As the seller submitted payments, the commission would be his wife’s money instead of his money. When the seller defaulted on payments after the wife had received $14,317.16, she claimed that her ex-husband owed her the difference for the $25,000 total.

Both the husband and wife asserted that the property settlement was ambiguous and made motions for a summary judgment. Summary judgments require a court to deliver a ruling based on the facts without a full trial. The trial court found in the wife’s favor, rendering the summary judgment that the husband owed her $10,682.84, which was the remainder of the $25,000 commission.

Supreme Court of Texas reviews the appeal

The court of appeals confirmed, the husband appealed, and Coker v. Coker went before the Supreme Court of Texas. The judges considered similar cases that had set precedents, which included:

• Ascertaining the true intentions of parties as expressed in the agreement
• Considering the entire writing in an effort to harmonize and give effect to all the provisions of the contract so none are rendered meaningless
• Determining whether the agreement was worded so it can be given certain or definite legal meaning or interpretation, which means it is not ambiguous
• Determining an ambiguous contract as one where meaning is uncertain and doubtful or reasonably susceptible to more than one meaning
• That granting a summary judgment motion is improper when a contract contains ambiguity

One Supreme Court justice found the agreement ambiguous. Therefore, the summary judgment was improper, and he ruled that the case should go to trial before the lower trial court. The three other Supreme Court justices dissented, finding that the agreement was not ambiguous and the husband owed the wife the full $25,000 as promised. The overall decision went to the wife.