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How to Resolve Contract Disputes: When Ambiguity Strikes


When Ambiguity Comes into Play With Contract Disputes

In a contract, every word on every page has consequential meaning. However, a court’s interpretation of words in the contract like can, may, shall, must, and will be varies and can influence what state the litigation takes place in. This ambiguity can be extremely significant.

How the Word "May" Caused a Stir in 2008

Case Study: Plaintiff Arkel International, L.L.C. (“Arkel”) and Defendant Parsons Global Services, Inc. (“Parsons”) reached a dispute over sums due under their contracts.

  • The plaintiff filed a suit in the Middle District of Louisiana.

In response, citing improper venue, the defendant filed a Motion to Dismiss or requested, in the alternative, that the suit be transferred to California.

The Middle District of Louisiana, the defendant argued, is excluded as an authorized and proper venue by the parties’ forum selection clause:

“If, …, the parties have not succeeded in negotiating a resolution of the dispute, either party may institute suit in the Superior Court of the State of California for the County of Los Angeles, or, if mutually agreed to by the parties, the dispute shall be settled by arbitration in Pasadena, California ….”

           - Arkel Int’l, L.L.C. v. Parsons Glob. Servs., Inc., No. CV 07-474-FJP-DLD, 2008 WL 11413369, at *3 (M.D. La. Jan. 8, 2008)

In other words, the defendant claimed that the clause permits “either a lawsuit in state court in Los Angeles, or arbitration in Pasadena. There are two options and the parties may choose either one. The clause does not indicate that the parties ‘may’ do anything else.”

The Plaintiff, in opposition, stated:

  1. The clause is permissive rather than mandatory, since the beginning of the clause says that “either party may institute suit in the Superior Court of the State of California.”
  2. The clause does not establish the chosen venue as exclusive and does not prohibit litigation elsewhere.
  3. If the Court finds the language of the forum selection clause subject to more than one reasonable interpretation, the Court “should construe any ambiguity against the drafter of the contract (Parsons) pursuant to traditional contract interpretation” and deny defendants’ motion to dismiss.

And so the court did. The Court, located in the Fifth Circuit, found that the forum selection clause was permissive rather than mandatory. The Fifth Circuit explained that “for a forum selection clause to be exclusive, it must…clearly demonstrate the parties’ intent to make that jurisdiction exclusive.”

Case Results

Accordingly, the defendants's motion to dismiss was denied. However, the Court found that the parties’ inclusion of the State of California in the agreement was significant, as otherwise there would have been no point in its inclusion. Following this line of thought, the Court granted the defendant's motion to transfer the case to California. Finding the clause permissive does not render the forum selection clause irrelevant or unenforceable.

For these reasons, the Court denied the defendant’s Motion to Dismiss but granted the defendant’s alternative Motion to Transfer.

Uncertain About the Wording in Your Contract?

When it comes to contracts, the smallest words can matter the most. The best way to resolve a contract dispute is with an attorney who can sit down with you and do the translating for you. HDR works on a variety of cases, contract disputes being one of them. Call us so we can help you.