KLAPP v UNITED INSURANCE GROUP AGENCY, INC
Docket Nos. 119175, 119176
Supreme Court of Michigan
June 18, 2003
Rehearing denied September 30, 2003. 469 Mich 1222.
468 Mich 459 | 663 N.W.2d 447
MARKMAN, J.
Argued January 14, 2003 (Calendar No. 1).
In an opinion by Justice MARKMAN, joined by Chief Justice CORRIGAN, and TAYLOR and YOUNG, JJ., the Supreme Court held:
The trial court did not err in admitting extrinsic evidence to resolve the contractual ambiguity.
1. In this case, language in the contract is in irreconcilable conflict with the language of another document incorporated in the contract by reference, so the conflicting sections of the contract language create an ambiguity. To resolve the fact question created by the ambiguity, the finder of fact is to consider relevant extrinsic evidence to aid in the interpretation of the contract. If all conventional means of contract interpretation, including the consideration of relevant extrinsic evidence leave the fact-finder unable to determine what the parties intended their contract to mean, the finder of fact may then, and only then, resort to the rule of construing the document against the drafter, known as the rule of contra proferentem.
2. Rules of construction are designed to help determine the parties’ intent. The rule of construing a document against the drafter is not a rule of construction, rather it is a rule of legal effect because it is designed, not to help determine the parties’ intent, but to resolve a dispute where the parties’ intent cannot be determined.
Justice CAVANAGH concurred in the result only.
Reversed and remanded.
CONTRACTS - AMBIGUITY - CONSTRUCTION AGAINST DRAFTER.
Construing a contract against the drafter to resolve ambiguous contract language is applicable only if the intent of the parties cannot be discerned through the use of all conventional rules of interpretation, including an examination of relevant extrinsic evidence.
Warner Norcross & Judd LLP (by James Moskal) for the plaintiff-appellant.
Falcone & Rolfe, P.C. (by Brian H. Rolfe), for the defendant-appellee.
MARKMAN, J. We granted leave to appeal in this case to consider whether defendant breached the parties’ written contract by refusing to pay plaintiff retirement renewal commissions on insurance policies that plaintiff sold on behalf of defendant while plaintiff was working for defendant. The trial court denied defendant‘s motion for summary disposition. It concluded that the contract was ambiguous and, thus, that its interpretation raised a question of fact that must be decided by the jury, which could consider relevant extrinsic evidence. The jury found in favor of plaintiff. The Court of Appeals reversed, concluding that the contract unambiguously stated that an agent must be at least sixty-five years old and have worked at least ten years for defendant in order to qualify for retirement renewal commissions and, therefore, that
I. FACTS AND PROCEDURAL HISTORY
When plaintiff began working as an insurance agent for defendant in 1990, they entered into a contract, titled the “Agent‘s Agreement.” Plaintiff permanently stopped working for defendant in 1997.2 Plaintiff brought this action, alleging that defendant failed to pay renewal commissions to which plaintiff was entitled pursuant to the vesting schedule in their contract that provided that an agent with seven years of service is entitled to the vesting of one hundred percent
II. STANDARD OF REVIEW
We review de novo a trial court‘s ruling on a motion for summary disposition. Stanton v Battle Creek, 466 Mich 611, 614; 647 NW2d 508 (2002). Similarly, whether contract language is ambiguous is a question of law that we review de novo. Farm Bureau Mut Ins Co v Nikkel, 460 Mich 558, 563; 596 NW2d 915 (1999). Finally, the proper interpretation of a contract is also a question of law that we review de novo. Henderson v State Farm Fire & Cas Co, 460 Mich 348, 353; 596 NW2d 190 (1999).
III. ANALYSIS
The Agent‘s Agreement at issue here provides in relevant part:
5. Vested Commissions. Commissions shall be vested in the following manner:
(A) Death, disability, or retirement during term hereof. Upon the death, disability, or retirement (as those terms shall be then defined in the Agent‘s Manual) of Agent at any time prior to the termination of this Agreement, Agent (or Agent‘s designated death beneficiary who shall be designated by Agent in writing; or in the absence of such written designation, Agent‘s estate) shall thereafter be entitled to receive one hundred percent (100%) of such renewal commissions then payable from premiums on Agent‘s policies in
place, in such amounts as would otherwise have been payable to Agent, until the aggregate renewals payable to Agent thereon shall equal less than Forty-One Dollars and Sixty-Seven Cents ($41.67) per month. If upon the date of death, disability, or retirement, Agent shall have aggregated eight (8) or more years of service under this Agreement, his then vesting shall be determined in accordance with the normal vesting schedule. (B) Vesting Schedule. In the event of a termination of this Agreement for reasons of death, disability and retirement (as defined in the Agent‘s Manual), Agent as set forth below on the date of execution hereof shall be entitled to receive a percentage of renewal commissions then payable from premiums on Agent‘s policies in place, applicable to such amounts as would otherwise have been payable to Agent in accordance with the following vesting schedule:
Agent‘s Years of Service % of Renewals Vested Less than 2 years 0% 2 years 10% 3 years 30% 4 years 50% 5 years 70% 6 years 90% 7 years 100% 8 years 110% 9 years 120% 10 years 130% 11 years 140% 12 years 150%
With regard to retirement, the Agent‘s Manual provides:
Retirement is understood to be disengagement from the insurance industry. Vestment for retirement is age 65 or 10 years of service whichever is later.
Plaintiff, on the other hand, argued that the contract was ambiguous because the vesting schedule in § 5(B) of the Agent‘s Agreement conflicts with the sixty-five years of age and ten years of service requirements in the Agent‘s Manual. That is, under the vesting schedule, a percentage of renewal commissions were vested after two years of service, while, under the Agent‘s Manual‘s definition of retirement, which the Agent‘s Agreement incorporated, renewal commissions were not vested at all until an agent reached sixty-five years of age and had served as an agent with defendant for ten years. Plaintiff further argued that, because this contract was ambiguous, its interpretation was a question of fact that must be decided by the jury in light of relevant extrinsic evidence. As already noted, the trial court agreed with plaintiff that the contract was ambiguous and, thus, must be interpreted by the jury in light of relevant extrinsic evidence.10
On appeal to the Court of Appeals, plaintiff argued that the early years of the vesting schedule (years two through nine) directly conflicted with the sixty-five years of age and ten years of service requirements, creating an ambiguity that the jury properly resolved against defendant. Defendant, on the other hand, argued that years two through nine of the vesting schedule should be ignored. The Court of Appeals, correctly recognizing that years two through nine of the vesting schedule had to be given some meaning, but disagreeing with plaintiff that they applied to agents who had retired, concluded that these years of the vesting schedule only applied to agents who died or had become disabled. Plaintiff filed a motion for rehearing, arguing that the Court of Appeals had overlooked § 5(A) of the Agent‘s Agreement, which provided that, regardless of age or years of service, an agent who died or became disabled while still employed was entitled to receive one hundred percent of his renewal commissions. Therefore, plaintiff argued, the Court of Appeals erred in concluding that years two through nine of the vesting schedule applied to agents who died or became disabled. The Court of Appeals denied plaintiff‘s motion for rehearing without explanation.
“An insurance contract is ambiguous when its provisions are capable of conflicting interpretations.” Nikkel, supra at 566. Accordingly, if two provisions of the same contract irreconcilably conflict with each other, the language of the contract is ambiguous. Further, courts cannot simply ignore portions of a contract in order to avoid a finding of ambiguity or in order to declare an ambiguity. Instead, contracts must be “‘construed so as to give effect to every word or phrase as far as practicable.‘” Hunter v Pearl Assurance Co, Ltd, 292 Mich 543, 545; 291 NW 58 (1940), quoting Mondou v Lincoln Mut Cas Co, 283 Mich 353, 358-359; 278 NW 94 (1938).
In our judgment, the vesting schedule found in § 5(B) of the Agent‘s Agreement irreconcilably conflicts with the Agent‘s Manual‘s definition of retirement, which the Agent‘s Agreement incorporates. Under the vesting schedule, an agent who has served two or more years with defendant is entitled to a percentage of renewal commissions; while, under the Agent‘s Manual‘s definition of retirement, an agent is only entitled to a percentage of renewal commissions if that agent is at least sixty-five years old and has served ten or more years with defendant. Accordingly, while plaintiff is entitled to renewal commissions under the vesting schedule, he is not entitled to renewal commissions under the Agent‘s Manual‘s definition of retirement. Therefore, the language of the contract is ambiguous.
The Court of Appeals attempted to avoid a finding of ambiguity by concluding that, if an agent has less than ten years of service with defendant, he cannot
Section 5(A) of the Agent‘s Agreement provides that an agent who dies or becomes disabled is automatically one hundred percent vested. Therefore, contrary to the contention of the Court of Appeals, years two through nine of the vesting schedule, which provide for less than one hundred percent vesting, would have no application to an agent who dies or becomes disabled. If the contract is read, as the Court of Appeals read it, to require an agent to be at least sixty-five years old and to have served as an agent for defendant for at least ten years to be considered retired, years two through nine of the vesting scheduled are rendered meaningless. Because there is no way to read the provisions of this contract in reason-
B. INTERPRETATION OF AMBIGUOUS CONTRACT
It is well settled that the meaning of an ambiguous contract is a question of fact that must be decided by the jury. Hewett Grocery Co v Biddle Purchasing Co, 289 Mich 225, 236; 286 NW 221 (1939). ” ‘Where a contract is to be construed by its terms alone, it is the duty of the court to interpret it; but where its meaning is obscure and its construction depends upon other and extrinsic facts in connection with what is written, the question of interpretation should be submitted to the jury, under proper instructions.’ ” O‘Connor v March Automatic Irrigation Co, 242 Mich 204, 210; 242 NW 784 (1928) (citation omitted).
Where a written contract is ambiguous, a factual question is presented as to the meaning of its provisions, requiring a factual determination as to the intent of the parties in entering the contract. Thus, the fact finder must interpret the contract‘s terms, in light of the apparent purpose of the contract as a whole, the rules of contract construction, and extrinsic evidence of intent and meaning. [11 Williston, Contracts (4th ed), § 30:7, pp 87-91.]
In resolving such a question of fact, i.e., the interpretation of a contract whose language is ambiguous, the jury is to consider relevant extrinsic evidence. As this Court explained in Penzien v Dielectric Products Engineering Co, Inc, 374 Mich 444, 449; 132 NW2d 130 (1965):
“If the contract in question were ambiguous or ‘doubtful,’ extrinsic evidence, particularly evidence which would indicate the contemporaneous understanding of the parties,
would be admissible as an aid in construction of the disputed terms.” “The law is clear that where the language of the contract is ambiguous, the court can look to such extrinsic evidence as the parties’ conduct, the statements of its representatives, and past practice to aid in interpretation.” [Citations omitted.]
Looking at relevant extrinsic evidence to aid in the interpretation of a contract whose language is ambiguous does not violate the parol evidence rule.
“The parol evidence rule does not preclude the admission of parol or extrinsic evidence for the purpose of aiding in the interpretation or construction of a written instrument, where the language of the instrument itself taken alone is such that it does not clearly express the intention of the parties or the subject of the agreement. Such evidence is admitted not to add to or detract from the writing, but merely to ascertain what the meaning of the parties is. Thus a written instrument is open to explanation by parol or extrinsic evidence when it is expressed in short and incomplete terms, or is fairly susceptible of two constructions, or where the language employed is vague, uncertain, obscure, or ambiguous, and where the words of the contract must be applied to facts ascertainable only by extrinsic evidence, a resort to such evidence is necessarily permitted.” [Edoff v Hecht, 270 Mich 689, 695-696; 260 NW 93 (1935) (citation omitted).]
In interpreting a contract whose language is ambiguous, the jury should also consider that ambiguities are to be construed against the drafter of the contract.11 Herweyer v Clark Hwy Services, Inc, 455 Mich
However, if the language of a contract is ambiguous, and the jury remains unable to determine what the parties intended after considering all relevant extrinsic evidence, the jury should only then find in favor of the nondrafter of the contract pursuant to the rule of contra proferentem. In other words, the rule of contra proferentem should be viewed essentially as a “tie-breaker,” to be utilized only after all conventional means of contract interpretation, including the consideration of relevant extrinsic evidence, have been applied and found wanting.
This view of the rule of construing against the drafter of the contract is in accordance with 2 Restatement Contracts, 2d, § 206, p 105, which provides:
In choosing among the reasonable meanings of a promise or agreement or a term thereof, that meaning is generally preferred which operates against the party who supplies the words or from whom a writing otherwise proceeds.
The comments following this rule state that “[i]n cases of doubt, therefore, so long as other factors are not decisive, there is substantial reason for preferring the meaning of the other party. . . .” Id. “[T]he rule is ‘the last one to be resorted to, and never to be applied except when other rules of interpretation fail.‘” Id., Reporter‘s Note, p 106, citation omitted. Treatises also indicate that this is a so-called “rule of last resort.” For example, 5 Corbin, Contracts (rev ed, 1998), § 24.27, pp 297-300, provides:
The “contra proferentem” rule has been described as being applicable only as a last resort, when other tech-
niques of interpretation and construction have not resolved the question of which of two or more possible reasonable meanings the court should choose. One court wrote that it is “a tie breaker when there is no other sound basis for choosing one contract interpretation over another.” . . . Another federal court expressed a similar reservation concerning use of the rule: “[T]his rule of construction should not be enlarged to [clarify] perfunctorily . . . an ambiguous meaning; the trier of fact should still consider the drafting party‘s evidence.” The “contra proferentem” rule thus yields to other techniques of interpretation, including the attempt to give a valid, legal, and reasonable meaning to as many of the contract terms as possible. [Citations omitted.]
In addition, Williston, supra, § 32:12, pp 480-482, provides:
The rule of contra proferentem is generally said to be a rule of last resort and is applied only where other secondary rules of interpretation have failed to elucidate the contract‘s meaning. . . . Finally, the rule does not justify a court in adopting an interpretation contrary to that asserted by the drafter, simply because of his or her status as the drafter. Rather, it is only when consistent with the rules of contract interpretation, the meaning proposed by the nondrafter (or an altogether different meaning determined by the court) is reasonable—when there is a true ambiguity and the court must choose between two or more reasonable meanings—that the rule of contra proferentem is properly invoked.
The rule of contra proferentem is a rule of last resort because, “The primary goal in the construction or interpretation of any contract is to honor the intent of the parties,” Rasheed v Chrysler Corp, 445 Mich 109, 127 n 28; 517 NW2d 19 (1994), and the rule of contra proferentem does not aid in determining the parties’ intent. Instead, the comments after the restatement refer to the rule of contra proferentem,
The rule is not actually one of interpretation, because its application does not assist in determining the meaning that the two parties gave to the words, or even the meaning that a reasonable person would have assigned to the language used. It is chiefly a rule of policy, generally favoring the underdog. It directs the court to choose between two or more possible reasonable meanings on the basis of their legal operation, i.e., whether they favor the drafter or the other party.
In sum, the jury can consider relevant extrinsic evidence as an aid in interpreting a contract whose language is ambiguous. However, if, after the jury has applied all other conventional means of contract interpretation and considered the relevant extrinsic evidence, the jury is still unable to determine what the parties intended, the jury should then construe the ambiguity against the drafter. That is, the rule of contra proferentem is only to be applied if the intent of the parties cannot be discerned through the use of all conventional rules of interpretation, including an examination of relevant extrinsic evidence.
The concurring opinion asserts that, “when a contract is drafted entirely by one party, without any bilateral negotiations,” the rule of contra proferentem
We respectfully disagree with the concurring opinion‘s reference to the rule of contra proferentem as a “rule of construction.” In our judgment, the rule of contra proferentem is not a rule of construction, rather, as explained above, it is a rule of legal effect. See pp 473-474. While rules of construction are designed to help determine the parties’ intent, the rule of contra proferentem is designed to resolve a dispute where the parties’ intent cannot be determined.
Further, as the concurring opinion correctly states, “[t]he ultimate objective in interpreting an ambiguous contract is to ascertain the intent of the parties. . . .” Post at 483. Therefore, in our judgment, it is only obvious that a method of construing a contract that helps ascertain the intent of the parties should be preferred over one that does not.14 We agree with the
concurring opinion that extrinsic evidence ” ‘provides an incomplete guide with which to interpret contractual language.’ ” Post at 483. That is, extrinsic evidence is not the best way to determine what the parties intended. Rather, the language of the parties’ contract is the best way to determine what the parties intended. However, where, as in cases such as this one, it is not possible to determine the parties’ intent from the language of their contract, the next best way to determine the parties’ intent is to use relevant extrinsic evidence. Such evidence at least affords a way by which to ascertain the parties’ intent, unlike the rule of contra proferentem, which focuses solely on the status of the parties to a contract.15
Finally, we disagree with the concurring opinion‘s contention that “this Court has consistently applied the rule of construing against the drafter as the primary tool of construction. . . .” Id. at 485. Not one of the cases cited in the concurring opinion, in fact, concludes that relevant extrinsic evidence is inadmissible to help a jury determine the parties’ intent where the language of a contract is ambiguous. In other words, not a single one of these cases concludes that the rule of contra proferentem is somehow a “primary rule of construction.” Instead, in each of these cases, the rule of contra proferentem was, in all likelihood, applied because there was no way to determine the
In this case, plaintiff introduced as extrinsic evidence an older version of the Agent‘s Agreement and deposition testimony from defendant‘s executives showing that defendant‘s past practice had been to pay former agents the renewal commissions specified by § 5(B) of the vesting schedule, regardless of whether those agents had ten years of service with defendant or had reached age sixty-five.
Plaintiff argues that the definition of retirement under the contract is simply “disengagement from the insurance industry” and that the second sentence under the section defining retirement in the Agent‘s Manual was unintentionally left over from a time before defendant‘s Agent‘s Agreement contained a
Defendant argues that the jury should not have considered this extrinsic evidence. However, as discussed above, the jury is to consider relevant extrinsic evidence when interpreting a contract whose language is ambiguous. How the drafting party has interpreted ambiguous contractual language in the past is certainly relevant in determining what the parties intended such language to mean. The meaning of a provision in a contract whose language is ambiguous “must be ascertained in the light of all of the relevant circumstances, . . . including, . . . the meanings accepted by the parties.” Davis v Kramer Bros Freight Lines, Inc, 361 Mich 371, 375; 105 NW2d 29 (1960). “There is no doubt that evidence of practical interpretation by the parties is admissible as an aid in the determination of the meaning to be given legal effect.” Id. at 375-376.
Where parties by such a uniform course of conduct for a long time have given a contract a particular construction, that construction will be adopted by the courts.
“The practical interpretation given to contracts by the parties to them, while engaged in their performance and before any controversy has arisen concerning them, is one of the best indications of their true intent.” [People ex rel Attorney General v Michigan Central R Co, 145 Mich 140, 166; 108 NW 772 (1906) (citation omitted) (portion of dissent by GRANT, J., assented to by the majority at 150).]
Because the language of the contract here is ambiguous, and because defendant had, in the past, construed this contract to require the payment of retirement renewal commissions according to the vesting schedule, even if the agent was not at least sixty-five years old and had not served as an agent with defendant for at least ten years, the trial court did not err in instructing the jury to consider this evidence.
Although the trial court correctly instructed the jury that it could consider relevant extrinsic evidence and that any ambiguities should be construed against the drafter pursuant to the rule of contra proferentem, the trial court failed to inform the jury that it could only apply the rule of contra proferentem if it was unable to discern the parties’ intent from the extrinsic evidence. However, in this case, this error was harmless. The jury did one of two things here. The jury either construed the language of the contract in favor of plaintiff pursuant to the rule of contra proferentem, or it construed the language of the contract in favor of plaintiff because the extrinsic evidence pointed to a construction of the contract in
IV. CONCLUSION
If two provisions of the same contract irreconcilably conflict with each other, the language of the contract is ambiguous. In this case, the contract‘s definition of retirement irreconcilably conflicts with the contract‘s vesting schedule. Under the contract‘s definition of retirement, plaintiff is not entitled to renewal commissions; while, under the vesting schedule, plaintiff is entitled to renewal commissions. Accordingly, the contract language at issue here is ambiguous.
The interpretation of a contract whose language is ambiguous is a question of fact for the jury to decide. When interpreting a contract whose language is ambiguous, the jury is to consider relevant extrinsic evidence. That the drafting party interpreted the ambiguous contractual language in a certain way for many years is relevant extrinsic evidence.
In interpreting a contract whose language is ambiguous and in which the parties’ intent cannot other-
Therefore, we conclude that the trial court here did not err in instructing the jury that it should consider relevant extrinsic evidence in order to discern the parties’ intent, and that it should also construe any ambiguities against the drafter. Although the trial court did err in failing to inform the jury that it should only construe ambiguities against the drafter if it cannot discern the parties’ intent from the relevant extrinsic evidence, this error was harmless. Accordingly, we reverse the judgment of the Court of Appeals and remand this case to the Court of Appeals for consideration of defendant‘s other appellate issue and plaintiff‘s cross-appeal.
CORRIGAN, C.J., and TAYLOR and YOUNG, JJ., concurred with MARKMAN, J.
CAVANAGH, J., concurred in the result only.
WEAVER, J. I concur in the decision to reverse the judgment of the Court of Appeals and remand the case to that Court for consideration of issues raised, but not addressed, below. I write separately because I disagree with the majority‘s holding that “the rule of contra proferentem is only to be applied if the intent of the parties cannot be discerned through the use of all conventional rules of interpretation, including an examination of relevant extrinsic evidence.” Ante at
The doctrine of contra proferentem, under which a contract that is ambiguous will be construed against the party preparing it, is a well-established rule. See, e.g., Universal Underwriters Ins Co v Kneeland, 464 Mich 491, 498; 628 NW2d 491 (2001) (discussing the “rule requiring that contractual ambiguities be construed against the drafter“); Herweyer v Clark Hwy Services, Inc, 455 Mich 14, 22; 564 NW2d 857 (1997) (“As the contract period under consideration is ambiguous, it must be construed against the drafter.“). In general, it is a rule of last resort, to be applied only if the intent of the parties cannot be discerned by the use of other rules of interpretation. See 2 Farnsworth, Contracts (2d ed), ch 7 § 7.11, and 5 Corbin, Contracts (rev ed, 1998), § 24.27, pp 297-300.
The questions we asked the parties to address1 are whether extrinsic evidence should be precluded and whether the rule of construing against the drafter should be applied initially, instead of as a rule of last resort, when the contract is drafted entirely by one
The ultimate objective in interpreting an ambiguous contract is to ascertain the intent of the parties so the agreement can be carried out according to that intent. Loyal Order of Moose, Adrian 1034 v Faulhaber, 327 Mich 244, 250; 41 NW2d 535 (1950); Stine v Continental Cas Co, 419 Mich 89, 112; 349 NW2d 127 (1984). When there are bilateral negotiations between the parties, a court can assume that there is a relation between the contract terms that were agreed upon and the parties’ expectations as revealed by extrinsic evidence. However, “unless extrinsic evidence can speak to the intent of all parties to a contract, it provides an incomplete guide with which to interpret contractual language.” SI Mgt LP v Wininger, 707 A2d 37, 43 (Del, 1998) (emphasis in original).
The Supreme Court of Delaware has held that where ambiguity arises in a contract drafted solely by one side and offered to others on a take-it-or-leave-it basis, the rule of construing against the drafter is determinative. SI Mgt, supra; followed by Intel Corp v Via Technologies, Inc, 174 F Supp 2d 1038 (ND Cal, 2001). In SI Mgt the Delaware court analyzed its approach to interpreting insurance contracts. The Delaware courts had said that if an insurance contract is ambiguous, “‘the principle of contra proferentem dictates that the contract must be construed against the drafter.‘” SI Management, supra at 42 (citation omitted). The court found that the policy behind that principle of construing against the drafter
There are sound public-policy reasons behind a black letter rule that when contractual provision are drafted entirely by one party, any ambiguity in the contract is to be construed against the drafter. First, the rule of contra proferentem provides a strong incentive for a party drafting a contract to use clear and unambiguous language. Second, the use of extrinsic evidence in circumstances involving ambiguity could be destabilizing to contractual relations and require more involved litigation by allowing parties to use assertions of oral understandings and examples of past behavior rather than relying on a written contract with the understanding that any ambiguity should be construed against its drafter.
This Court has not previously addressed whether the rule of construing against the drafter should be used as a primary rule of construction in ambiguous contracts or only used after considering any extrinsic evidence available.2 However, in interpreting ambigu-
ous contracts, this Court has consistently applied the rule of construing against the drafter as its primary, indeed sole, aid to construction. See Herweyer, supra at 22 (“As the contract period under consideration is ambiguous, it must be construed against the drafter, the defendant.“), Lichnovsky v Ziebart Int‘l Corp, 414 Mich 228, 239; 324 NW2d 732 (1982) (“Any ambiguity in the expression must be construed against Ziebart, as its predecessor drafted the agreement.“), Ladd v Teichman, 359 Mich 587, 592; 103 NW2d 338 (1960) (“We agree with appellees that appellant having drafted the contract, any ambiguity contained in it must be construed against him.“), and Veenstra v Associated Broadcasting Corp, 321 Mich 679, 691; 33 NW2d 115 (1948) (“Defendants caused the drafting of the two contracts and any doubt or ambiguity concerning the nature of the contracts must be resolved against the defendants.“).
Similarly, this Court has consistently applied the rule of construing against the drafter as the primary tool of construction in insurance contracts. In insurance contracts, one party decides the terms of the contract, drafts the contract, and presents it to the other party in a take-it-or-leave-it fashion, all with no bilateral negotiation. Michigan Millers Mut Ins Co v Bronson Plating Co, 445 Mich 558, 567; 519 NW2d 864 (1994) (in interpreting insurance cases, a well-established principle of construction is, “Where ambiguity is found, the court must construe the term in
I would hold that this principle should be extended beyond insurance contracts and applied to other contracts in which there is a similar disparity of control in the creation of the terms of the contract. Here defendant was the entity in sole control of the process of creating and setting forth the terms of the contract. The parties did not engage in bilateral negotiation; the plaintiff‘s only choice in the terms of the contract was to take them or leave them. In such a
In this case, the trial judge allowed the plaintiff to introduce a variety of extrinsic evidence, including references to the older version of the Agent‘s Agreement4 and deposition testimony by the defendant‘s executives.5 I would hold that the trial court erred in admitting the extrinsic evidence to resolve the contract‘s ambiguity. However, that error was harmless, because the same result was achieved as would have been if the contract had been construed against its drafter, defendant.
Accordingly, I concur with the decision to reverse the judgment of the Court of Appeals and remand the case to that Court for consideration of those issues raised, but not addressed, below.
KELLY, J., concurred with WEAVER, J.