466 S.W.3d 448
Ark. Ct. App.2015Background
- Bee-Three agreed to buy a commercial lot from the Prochazkas and terminated during the Inspection Period, demanding $7,000 earnest money.
- Prochazkas refused to return the earnest money; Bee-Three sued for it, and Prochazkas counterclaimed for breach of contract and liquidated damages.
- The circuit court granted summary judgment to Bee-Three, holding Section 4.3 unambiguously gave Bee-Three an absolute right to terminate during the Inspection Period.
- The court noted 4.3 allowed termination if Buyer determines the property is not suitable, with Earnest Money returned less independent consideration.
- The appellate court reversed, finding Section 4.3 ambiguous when read with the entire contract and remanded for trial.
- The majority held ambiguity existed and extrinsic evidence could reveal the parties’ intent; the case was remanded for trial on the counterclaim.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Section 4.3 ambiguous when read with the whole contract? | Bee-Three argues 4.3 is absolute and unambiguous. | Prochazkas contend the language is ambiguous and tied to Article 4’s inspection purpose. | Ambiguity exists; remand for trial. |
| May extrinsic evidence resolve the ambiguity in Section 4.3? | Bee-Three may submit affidavits to show intended use and end user. | If ambiguity exists, extrinsic evidence is permissible to ascertain intent. | Extrinsic evidence admissible; remand for trial. |
Key Cases Cited
- Keller v. Safeco Ins. Co. of Am., 317 Ark. 308 (1994) (ambiguity standard for contract interpretation)
- Elam v. First Unum Life Ins. Co., 346 Ark. 291 (2001) (contract language must be interpreted by plain meaning)
- Singletary v. Singletary, 2013 Ark. 506 (2013) (look to entire agreement for parties' intention)
- Roberts Contracting Co. v. Valentine-Wooten Rd. Pub. Facility Bd., 2009 Ark. App. 437 (2009) (apply plain language when contract unambiguous)
- Fryer v. Boyett, 64 Ark. App. 7 (1998) (plain and ordinary meaning governs)
- Zulpo v. Farm Bureau Mut. Ins. Co., 98 Ark. App. 320 (2007) (consider extrinsic evidence when ambiguity remains)
- State Auto Prop. & Cas. Ins. Co. v. Ark. Dep't of Envt'l Quality, 370 Ark. 251 (2007) (contract interpretation may involve surrounding context)
- Tri-Eagle Enterprises v. Regions Bank, 2010 Ark. App. 64 (2010) (ambiguity resolution and trial on contract interpretation)
- Harris Corp. v. Giesting & Assoc., Inc., 297 F.3d 1270 (11th Cir. 2002) (convenience termination language discussed as contrast)