Business and Legal Insights

Introduction: Why Precision in Contract Drafting Matters

Specificity in drafting allows contracting parties to allocate risk with precision and enable efficient dispute resolution. Unclear contractual language can foster disputes and litigation. In addition to offering helpful drafting suggestions, this article will discuss the impact of ambiguous language in commercial transactions, including the risk of litigation and uncertain outcomes.

Case Example: When Two Ships Named “Peerless” Sank a Deal

The case of Raffles v. Wichelhaus, 1864 WL 6161 (K.B. 1864), as every first-year law student learns, remains the classic and most widely known example of a latent ambiguity. In Raffles, an agreement obligated Raffles to sell and Wichelhaus to buy a specified quantity of cotton “to arrive ex Peerless.” Unknown to both, two ships named “Peerless” were sailing from Bombay, one in October (expected by Wichelhaus) and one in December (meant by Raffles). Wichelhaus refused to accept cotton arriving on the December ship. Raffles sued Wichelhaus for breach of contract. The Raffles court held that the parties’ mutual mistake regarding a fundamental term, the identity of the ship, prevented a “meeting of the minds” and rendered the contract void. The lesson Raffles teaches practitioners is as true today as it was in 1864. Focused, peerless (pun intended) drafting is required to avoid ambiguous language in today’s fast-paced and evolving world with multiple facilities, overlapping delivery windows, and layered supply chains.

What Makes a Contract Term “Ambiguous”?

A contract term is ambiguous when it is reasonably susceptible to more than one reasonable interpretation. See Rushing v. Rushing, No. 6D2024-1357, 2025 WL 2679794, at *3 (Fla. 6th DCA 2025). Ambiguity can either be patent or latent. If a contract term is patently ambiguous, it is unclear on its face. If a contract term is latently ambiguous, it may be facially clear, but an extrinsic fact or extraneous circumstance creates a need for an interpretation or reveals an insufficiency. See Washington v. VyStar Credit Union, No. 5D2024-0765, 2026 WL 317434, at *8 (Fla. 5th DCA 2026). Latent ambiguities are litigated more frequently than patent ambiguities. Latent ambiguity can result from undefined terms, vague modifiers, or failure to account for real-world barriers.

How Ambiguity Disrupts Performance Obligations

Unclear obligations don’t just create confusion; they also lead to conflicting expectations, performance delays, increased transaction costs, strategic behavior, and litigation risk. Worse, ambiguity can undermine equitable remedies like specific performance. Courts can’t enforce obligations they can’t clearly define. So, if a contract provision is too vague, specific performance may be off the table entirely. See 330 Michigan Ave., Inc. v. Cambridge Hotel, Inc., 183 So.2d 725, 726–27 (Fla. 3d DCA 1966).

Modern Examples of Ambiguity in Today’s Contracts

Modern courts continue to wrestle with ambiguity in performance terms. Disputes continue to arise where parties agree on language but not on meaning. See e.g., New Leaf Assets, LLC v. Jerue, 425 So. 3d 1108, 1111 (Fla. 4th DCA 2025) (finding the contract failed to specify the reasonable time for performance and remanding the case for a jury to determine whether two years was reasonable). Nonspecific legalese phrases might sound formal but are not precise, such as best, reasonable, or good faith efforts; without undue delay or reasonable time; industry-standard; and substantial compliance.

How Courts Resolve Ambiguity, and Why You Don’t Want Them To

When disputes arise over the meaning of an ambiguous term or phrase, courts first look to the context within the “four corners” of the contract. If the “four corners” analysis fails to provide guidance, courts turn to extrinsic evidence, such as emails, negotiations, and the parties’ course of dealing. When resolving ambiguities, courts apply familiar tools, including plain meaning, reading the contract as a whole (in pari materia), giving effect to all provisions (ejusdem generis), and finding that specific terms control over general terms (expressio unius, exclusio alterius). Contractual ambiguities can result in the admission of extrinsic evidence and judicial interpretation. Parties lose control when a judge decides what their contract means.

Drafting Strategies to Eliminate Ambiguity

To avoid ambiguity, cautious drafters should consider defining terms explicitly; using measurable standards (dates, quantities, specifications); avoiding vague modifiers without objective criteria or examples; addressing foreseeable scenarios; ensuring consistency in the use of language and defined terms; using concrete examples to illustrate the effect of a particular provision; and including integration clauses and clear procedures for amendment. Clarity upfront can avoid litigation later.

Conclusion: Precision as a Litigation-Prevention Tool

Any unclear or ambiguous term is a potential source of dispute. Every vague obligation is an invitation for competing interpretations. Raffles is used as a foundation contract case in law schools across the country for a reason. It is a timeless example of how a single ambiguous term, “Peerless,” was enough to sink even the most straightforward commercial deal. If it matters, say it clearly.

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This is the first of a ten-part series of blogs by Eric Adams and Melodie Khosrovani, discussing the ten most impactful contract provisions in commercial litigation.