In Contract Disputes, Context is Everything

Filed under: Real Estate Law

In any real estate deal, the contract governs the entire transaction. Generally speaking, you would think that having all agreements written into a contract means the deal is “set in stone” but in practice the typical real estate transaction includes multiple contingencies. More significantly when it comes to real estate disputes, we often see that one or more parties disagree on the meaning of language included in the contract. This is particularly true when one party did not consult with a real estate attorney prior to signing a contract with more complex provisions or processes.

Sometimes these situations arise due to “confirmation bias”. This means that one or both of the parties interpret certain clauses or phrases in a manner that supports their pre-conceived notion of the way they think things should be. Unfortunately, emotions often drive these perceptions and the end result is that logic goes out the window and both parties insist that their view of the contract is the “right” view.

When initial attempts to solve the dispute fail, the case often proceeds to a mandated mediation, followed by arbitration or court. The idea of mediation is to find a neutral third party, who can hopefully detangle the complex real estate contract and determine what was meant by the disputed language. If it isn’t done voluntarily through mediation, it will be finally and firmly done by an arbitrator or court, and to one party’s advantage.

When conflicts proceed this far, the first step for the mediator or judge is to decide whether the language is ambiguous in nature. When language is found to be unclear, the point of mediation or court proceedings is to determine the intent of each party when signing the contract. Therefore, the overall context of the entire contract will be considered. Of course, no one can be a mind reader, so it can be frustrating for either party in the conflict to have their intent called into question.

A good real estate contract should not include ambiguous language for precisely this reason. What you think you’re signing may not be what you are actually signing! Any time you write a real estate contract with other than the usual provisions found in the standard residential purchase agreement, it’s important to consult with an experienced real estate attorney.

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