The Forthright Negotiator Principle and the Legitimate Role ... - JD Supra
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The Forthright Negotiator Principle and the the Legitimate Legitimate Role Role of of Ambiguity Ambiguity in in Contracts Contracts
by
Norman M. M. Powell Powelland andEvangelos Evangelos Norman Kostoulas* Kostoulas* When drafting aa contract, contract, it’s it’s always always best besttotominimize minimizeambiguity, ambiguity,right? right? As with with so so much much in in the the law, law, the the answer, answer, it turns turns out, out, is is aa clear clear “it “itdepends.” depends.” Common Commonsense sensesuggests suggests that that clarity should be a primary goal in drafting contracts. But as Judge Posner notes, ambiguity clarity should be primary goal in drafting contracts. But as Judge Posner notes, ambiguity may 1 play valuablerole roleinincontract contract drafting.1 explains in The Economics of AsAs hehe explains in The LawLaw and and Economics of Contract play aa valuable drafting. Contract Interpretation, Interpretation, an an economic economic analysis analysis of of contract contract interpretation interpretationreveals reveals that that the the presence presence of intentional ambiguities in contracts is not only rational but, in many circumstances, intentional ambiguities in contracts is not only rational but, in many circumstances, desirable. desirable. There has has been beenmuch muchrecent recentdiscussion discussionofofthe theso-called so-calledforthright forthrightnegotiator negotiatorprinciple. principle. Some of itit seems to misapprehend misapprehendthe theprinciple, principle, suggesting suggestingititgives givesrise riseto toan anaffirmative affirmative duty duty to eliminate seems to ambiguity. ItItdoes does not. not. ItItisissimply simplyone oneofofaanumber numberof ofprinciples principlesofofcontract contractinterpretation interpretation used used by, among others, others, the theDelaware Delawarecourts. courts. An An economic analysis analysis of of the the forthright forthright negotiator principle efficiency. Posner principle shows shows that it aids social efficiency. Posner places places the principle in its its proper proper context.
The Law and Economics Economicsof ofContract ContractInterpretation Interpretation Posner beginswith with the the premise premisethat thatthe the“object “object of of judicial judicial enforcement Posner begins enforcement of contracts is to 2 minimize” socialtransaction transactioncosts costs associated contracts.2 are a of SuchSuch costs costs are a function minimize” the the social associated withwith contracts. function of the parties’ expenditures in the contract-drafting stage, as well as the expected costs litigation the parties’ expenditures in the contract-drafting stage, as well as the expected costs ofoflitigation or that greater greater expenditures expenditureson onthe theformer formertypically typically or other other dispute dispute resolution. Posner Posner suggests suggests that 3 correlate with lower probability, and cost, of litigation.3 Presumably, this correlation at correlate with lower probability, and cost, of litigation. Presumably, this correlation is atisleast 4 least to someextent extenta afunction function reduced ambiguity.4 When viewed to some ofof reduced ambiguity. When viewed fromfrom this this cost-benefit cost-benefit perspective, it becomes apparent that it is not socially desirable to draft contracts free from from any perspective, it becomes apparent that it is not socially desirable to draft contracts free any possible ambiguity (indeed, itit may from any may be be impossible to draft draft contracts contracts free from any possible ambiguity). draft aa contract ambiguity). Rather, Rather,parties partiesshould shouldnot notexpend expendmore moreresources resources to to negotiate negotiate and and draft contract than their expected expected savings savingsfrom from potential potential litigation litigation costs costs in the future.
While While courts courts cannot cannot control control many many of of the the variables variables in in Posner’s Posner’s equation for social transaction costs, they have adopted rules of construction that help minimize minimize social in three transaction costs, they have adopted rules of construction that help social costs costs in three ways. First, costs by by following following a hierarchy hierarchy of of rules rules that thatlimits limits judicial judicial First, courts courts can minimize costs inquiry. inquiry. Second, Second,courts courts can can minimize minimizecosts costs through consistent application of clear rules of
**
Mr. Powell partner,and andMr. Mr.Kostoulas Kostoulasisisananassociate, associate, in the Delaware Young Conaway Mr. Powell is is aa partner, in the Delaware lawlaw firmfirm Young Conaway Stargatt & StargattLLP, & where Taylor, counsel to to corporations corporations and andalternative alternative entities entitiesin in connection connection with with their Taylor, LLP, where they they act act as as Delaware counsel formation operations, and and the thedelivery delivery of of legal opinions on formation and and governance, governance, contracting and and operations, on matters matters of Delaware Delaware law. law. Their Theire-mail e-mailaddresses addresses are are [email protected] [email protected] and and [email protected], [email protected], respectively. 1 1 See SeeRichard RichardA.A.Posner, Posner, The Law and Economics of Contract Interpretation, 83 Tex. L. Rev. 1581, The Law and Economics of Contract Interpretation, 83 Tex. L. Rev. 1581, 1583 1583 (2005) (“Deliberate condition of (“Deliberate ambiguity ambiguitymay maybe beaanecessary necessary condition of making makingthe the contract; contract; the the parties parties may may be be unable on certain certain points points yet be content to take their chances chances on on being being able able to to resolve resolve them, them, with with unable to agree agree on or without without judicial judicialintervention, intervention,should shouldthe the need need arise.”). 2 2 Id. Id. at at1584. 3 1584. 3 Id. Id. at at1608. 4 1608. 4 See Seeid. id.atat1584. 1584.
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construction, giving rise to expectations on which which parties partiesmay mayrely. rely. Third, courts can can minimize minimize expectations on
costsby byallocating allocatingburdens burdens (e.g., of proof) to the “cheapest costs (e.g., of proof) to the “cheapest cost cost avoider.”5 avoider.”5 Delaware Rules Rules of of Contract Contract Construction Construction One of the most most well-known well-known rules of contract construction is the the “clear “clear meaning meaning rule” rule” or 6 It provides that “where the parties have created an the “four corners rule.”6 the “four corners rule.” It provides that “where the parties have created an unambiguous unambiguous integrated written statement of their of that that contract contract (not (not as subjectively integrated written statement of their contract, contract, the the language language of as subjectively understood by either party but) as as understood understoodby by aahypothetical hypothetical reasonable reasonablethird thirdparty partywill will understood by control.”7 rule encourages encouragessocial social efficiency two ways. First, because the clear control.”7 This This rule efficiency in in two ways. First, because the clear meaning meaning of contractdictates dictatesitsits interpretation, extrinsic evidence is admissible not admissible to interpret of the the contract interpretation, extrinsic evidence is not to interpret it.8 By it.8 By the limiting the judiciary judiciary limiting thescope scope of of judicial judicialinquiry inquirytotothe thelanguage languageof ofthe thedocument, document, the the costs costs to the and the parties in litigation are reduced. Second, because contracting parties recognize and the parties in litigation are reduced. Second, because contracting parties recognize that that courts utilize utilize the resourcesclarifying clarifying their contractual the clear clear meaning rule, they need only expend resources intent worth addressing. intent to to the the extent extent they they feel feel possible possible unforeseen unforeseen circumstances circumstances are are worth addressing.
Another well-known evidencerule. rule. It well-known rule rule of ofcontract contract construction construction is the parol evidence It provides that extrinsic evidence contradicting contradicting or supplementing a completely integrated contract is not or supplementing completely integrated
admissible.9 However,where wherethethe agreement is not integrated, and “there is admissible.9 However, agreement is not integrated, and “there is uncertainty in the uncertainty the meaning andinapplication application of the the terms terms of of the the contract, contract,[courts] [courts] will will consider testimony pertaining and of to agreements,communications communications and and other other factors factors which which bear on the proper to antecedent antecedent agreements, bear on the proper 10 interpretation ofthe thecontract.” contract.”10 Thus, parties make a conscious decision Thus, parties maymay make a conscious decision when when drafting a interpretation of drafting a contract to include an integration integration clause, clause, thereby therebylimiting limiting the role of extrinsic evidence extrinsic evidence in any future disputes, disputes,asaswell wellasas limiting costs of such potential future limiting thethe costs of such potential litigation.11 litigation.11 The forthright forthright negotiator negotiator principle principle is is yet yet another another principle of of contract contract interpretation utilized utilized by by the the Delaware Delaware courts. courts. ItItcomes comesinto intoplay playwhere whereresort resortto tothe the parol parolevidence evidence rule rule leaves leaves proper construction uncertain. uncertain. “[W]here ambiguity in contract language is not easily resolvable “[W]here ambiguity in contract language is not easily resolvable by by extrinsic extrinsic evidence, evidence, itit may may be be necessary necessary for the the court, in in considering considering alternative alternative reasonable reasonable interpretations of contract language, to resort to evidence of what one side in fact believed interpretations of contract language, to resort to evidence of what one side in fact believed the the obligation obligation to to be, be, coupled with with evidence evidence that that the other party knew or should have known of of such such
5 5 See Seeid. id.atat1601 1601(discussing (discussing allocation transaction costs to the “cheapest thethe allocation of of transaction costs to the “cheapest cost cost avoider”). 6 avoider”). 6 U.S. U.S.West, West,Inc. Inc.v.v.Time TimeWarner, Warner,Inc., Inc.,C.A. C.A.No. No.14555, 14555,1996 1996 Del. Ch. LEXIS55, 55, *30 (Del.Ch. Ch. Del. Ch. LEXIS at at *30 (Del. June June 6, note 1, 1, at at 1596. 1596. 6, 1996); 1996); Posner, Posner, supra supra note 7 7 U.S. U.S.West, West,1996 1996Del. Del.Ch. Ch.LEXIS LEXIS55, 55,atat*29-*30. 8 *29-*30. 8 See SeeEagle EagleIndus., Indus.,Inc. Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) a v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (“If(“If a contract is contract is unambiguous, extrinsic evidence may not be used to interpret the intent of the parties, to vary the terms of of unambiguous, extrinsic evidence may not be used to interpret the intent of the parties, to vary the terms the contract or to create create an anambiguity.”). ambiguity.”). 9 9 See SeePeden Peden Gray, No. 188, 2005, 2005 Del. LEXIS 389, at *6 (Del. Oct. v.v.Gray, No. 188, 2005, 2005 Del. LEXIS 389, at *6 (Del. Oct. 14,14, 2005). 10 2005). 10Pellaton Pellatonv.v.Bank BankofofNew NewYork, York,592 592A.2d A.2d473, 473,478 478 (Del.1991). (Del. 11 1991). 11See SeePosner, Posner, supra note at 1603 as parties the parties choose whether toahave a written supra note 1, at1,1603 (“So(“So just just as the choose whether to have written contract and contract and whether to include an arbitration clause, they also choose whether to state that their contract is whether to include an arbitration clause, they also choose whether to state that their contract is integrated integrated and by so so doing doing to to limit limit further furtherthe the role role of ofthe thejury juryororjudge judgeas as the the trier trierof offact factand andthe the expense expense of litigating break down.”). down.”). litigating aa suit suit should should their contractual relationship break
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belief.”12 Applying the theforthright forthrightnegotiator negotiatorprinciple principleininsuch such a case, court would belief.”12 Applying a case, the the court would adopt the 13 adopt the meaning as understood by one side, but known to both meaning as understood by one side, but known to both parties. parties.13 Application goal of of minimizing social Application of of the the forthright forthright negotiator negotiator principle principle furthers furthers the goal transaction costs. costs. If Party A knows that Party B believes a contract to mean If Party A knows that Party B believes a contract to mean one thing, but Party A A believes believes itit to to mean mean another, another, Party Party A A can can resolve resolve this this ambiguity ambiguityat at the the lowest lowest cost cost ex ex ante. ante. Party A A need only disclose the ambiguity, while Party B would need to invest resources need ambiguity, while Party B would need to invest resources to even learn that an an ambiguity ambiguity exists. exists. By By adopting adopting the the forthright forthrightnegotiator negotiator principle, principle,the the courts courts have have essentially burden on on the the lowest lowest cost cost avoider avoider to to disclose disclose aa known known ambiguity ambiguity ex essentially placed placed a burden ex ante ante or, alternatively, alternatively, be be forced forced to to accept accept the the other other party’s party’s interpretation interpretationex expost post should should the the issue issue be be litigated. To observers, itit seems seemsParty PartyAA has hasbehaved behavedpoorly, poorly,even evenactionably actionablyso. so. From From this this To some some observers, view, recastthe theforthright forthright negotiator negotiator principle principle as an affirmative affirmative duty, view, itit isis but but aa short short step to recast as an owed by one one negotiator negotiator to to another. another. It is not. While there are any number of While there are any number of arguments arguments concluding that Party Party A A should should (or (or shouldn’t) shouldn’t) disabuse disabuseParty PartyBBof ofhis hisblissfully blissfully clarion clarion view view of an ambiguous ambiguousprovision, provision, the theforthright forthright negotiator negotiator principle principle is not one one of of them. them. Rather, it is simply a rule of construction.
12 12
U.S.West, West,1996 1996Del. Del.Ch. Ch. LEXIS55, 55,atat U.S. LEXIS *34-*35. 13 *34-*35. 13 Id. at Id. at *63-*64. *63-*64.
The Forthright Negotiator Principle and the the Legitimate Legitimate Role Role of of Ambiguity Ambiguity in in Contracts Contracts
by
Norman M. M. Powell Powelland andEvangelos Evangelos Norman Kostoulas* Kostoulas* When drafting aa contract, contract, it’s it’s always always best besttotominimize minimizeambiguity, ambiguity,right? right? As with with so so much much in in the the law, law, the the answer, answer, it turns turns out, out, is is aa clear clear “it “itdepends.” depends.” Common Commonsense sensesuggests suggests that that clarity should be a primary goal in drafting contracts. But as Judge Posner notes, ambiguity clarity should be primary goal in drafting contracts. But as Judge Posner notes, ambiguity may 1 play valuablerole roleinincontract contract drafting.1 explains in The Economics of AsAs hehe explains in The LawLaw and and Economics of Contract play aa valuable drafting. Contract Interpretation, Interpretation, an an economic economic analysis analysis of of contract contract interpretation interpretationreveals reveals that that the the presence presence of intentional ambiguities in contracts is not only rational but, in many circumstances, intentional ambiguities in contracts is not only rational but, in many circumstances, desirable. desirable. There has has been beenmuch muchrecent recentdiscussion discussionofofthe theso-called so-calledforthright forthrightnegotiator negotiatorprinciple. principle. Some of itit seems to misapprehend misapprehendthe theprinciple, principle, suggesting suggestingititgives givesrise riseto toan anaffirmative affirmative duty duty to eliminate seems to ambiguity. ItItdoes does not. not. ItItisissimply simplyone oneofofaanumber numberof ofprinciples principlesofofcontract contractinterpretation interpretation used used by, among others, others, the theDelaware Delawarecourts. courts. An An economic analysis analysis of of the the forthright forthright negotiator principle efficiency. Posner principle shows shows that it aids social efficiency. Posner places places the principle in its its proper proper context.
The Law and Economics Economicsof ofContract ContractInterpretation Interpretation Posner beginswith with the the premise premisethat thatthe the“object “object of of judicial judicial enforcement Posner begins enforcement of contracts is to 2 minimize” socialtransaction transactioncosts costs associated contracts.2 are a of SuchSuch costs costs are a function minimize” the the social associated withwith contracts. function of the parties’ expenditures in the contract-drafting stage, as well as the expected costs litigation the parties’ expenditures in the contract-drafting stage, as well as the expected costs ofoflitigation or that greater greater expenditures expenditureson onthe theformer formertypically typically or other other dispute dispute resolution. Posner Posner suggests suggests that 3 correlate with lower probability, and cost, of litigation.3 Presumably, this correlation at correlate with lower probability, and cost, of litigation. Presumably, this correlation is atisleast 4 least to someextent extenta afunction function reduced ambiguity.4 When viewed to some ofof reduced ambiguity. When viewed fromfrom this this cost-benefit cost-benefit perspective, it becomes apparent that it is not socially desirable to draft contracts free from from any perspective, it becomes apparent that it is not socially desirable to draft contracts free any possible ambiguity (indeed, itit may from any may be be impossible to draft draft contracts contracts free from any possible ambiguity). draft aa contract ambiguity). Rather, Rather,parties partiesshould shouldnot notexpend expendmore moreresources resources to to negotiate negotiate and and draft contract than their expected expected savings savingsfrom from potential potential litigation litigation costs costs in the future.
While While courts courts cannot cannot control control many many of of the the variables variables in in Posner’s Posner’s equation for social transaction costs, they have adopted rules of construction that help minimize minimize social in three transaction costs, they have adopted rules of construction that help social costs costs in three ways. First, costs by by following following a hierarchy hierarchy of of rules rules that thatlimits limits judicial judicial First, courts courts can minimize costs inquiry. inquiry. Second, Second,courts courts can can minimize minimizecosts costs through consistent application of clear rules of
**
Mr. Powell partner,and andMr. Mr.Kostoulas Kostoulasisisananassociate, associate, in the Delaware Young Conaway Mr. Powell is is aa partner, in the Delaware lawlaw firmfirm Young Conaway Stargatt & StargattLLP, & where Taylor, counsel to to corporations corporations and andalternative alternative entities entitiesin in connection connection with with their Taylor, LLP, where they they act act as as Delaware counsel formation operations, and and the thedelivery delivery of of legal opinions on formation and and governance, governance, contracting and and operations, on matters matters of Delaware Delaware law. law. Their Theire-mail e-mailaddresses addresses are are [email protected] [email protected] and and [email protected], [email protected], respectively. 1 1 See SeeRichard RichardA.A.Posner, Posner, The Law and Economics of Contract Interpretation, 83 Tex. L. Rev. 1581, The Law and Economics of Contract Interpretation, 83 Tex. L. Rev. 1581, 1583 1583 (2005) (“Deliberate condition of (“Deliberate ambiguity ambiguitymay maybe beaanecessary necessary condition of making makingthe the contract; contract; the the parties parties may may be be unable on certain certain points points yet be content to take their chances chances on on being being able able to to resolve resolve them, them, with with unable to agree agree on or without without judicial judicialintervention, intervention,should shouldthe the need need arise.”). 2 2 Id. Id. at at1584. 3 1584. 3 Id. Id. at at1608. 4 1608. 4 See Seeid. id.atat1584. 1584.
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construction, giving rise to expectations on which which parties partiesmay mayrely. rely. Third, courts can can minimize minimize expectations on
costsby byallocating allocatingburdens burdens (e.g., of proof) to the “cheapest costs (e.g., of proof) to the “cheapest cost cost avoider.”5 avoider.”5 Delaware Rules Rules of of Contract Contract Construction Construction One of the most most well-known well-known rules of contract construction is the the “clear “clear meaning meaning rule” rule” or 6 It provides that “where the parties have created an the “four corners rule.”6 the “four corners rule.” It provides that “where the parties have created an unambiguous unambiguous integrated written statement of their of that that contract contract (not (not as subjectively integrated written statement of their contract, contract, the the language language of as subjectively understood by either party but) as as understood understoodby by aahypothetical hypothetical reasonable reasonablethird thirdparty partywill will understood by control.”7 rule encourages encouragessocial social efficiency two ways. First, because the clear control.”7 This This rule efficiency in in two ways. First, because the clear meaning meaning of contractdictates dictatesitsits interpretation, extrinsic evidence is admissible not admissible to interpret of the the contract interpretation, extrinsic evidence is not to interpret it.8 By it.8 By the limiting the judiciary judiciary limiting thescope scope of of judicial judicialinquiry inquirytotothe thelanguage languageof ofthe thedocument, document, the the costs costs to the and the parties in litigation are reduced. Second, because contracting parties recognize and the parties in litigation are reduced. Second, because contracting parties recognize that that courts utilize utilize the resourcesclarifying clarifying their contractual the clear clear meaning rule, they need only expend resources intent worth addressing. intent to to the the extent extent they they feel feel possible possible unforeseen unforeseen circumstances circumstances are are worth addressing.
Another well-known evidencerule. rule. It well-known rule rule of ofcontract contract construction construction is the parol evidence It provides that extrinsic evidence contradicting contradicting or supplementing a completely integrated contract is not or supplementing completely integrated
admissible.9 However,where wherethethe agreement is not integrated, and “there is admissible.9 However, agreement is not integrated, and “there is uncertainty in the uncertainty the meaning andinapplication application of the the terms terms of of the the contract, contract,[courts] [courts] will will consider testimony pertaining and of to agreements,communications communications and and other other factors factors which which bear on the proper to antecedent antecedent agreements, bear on the proper 10 interpretation ofthe thecontract.” contract.”10 Thus, parties make a conscious decision Thus, parties maymay make a conscious decision when when drafting a interpretation of drafting a contract to include an integration integration clause, clause, thereby therebylimiting limiting the role of extrinsic evidence extrinsic evidence in any future disputes, disputes,asaswell wellasas limiting costs of such potential future limiting thethe costs of such potential litigation.11 litigation.11 The forthright forthright negotiator negotiator principle principle is is yet yet another another principle of of contract contract interpretation utilized utilized by by the the Delaware Delaware courts. courts. ItItcomes comesinto intoplay playwhere whereresort resortto tothe the parol parolevidence evidence rule rule leaves leaves proper construction uncertain. uncertain. “[W]here ambiguity in contract language is not easily resolvable “[W]here ambiguity in contract language is not easily resolvable by by extrinsic extrinsic evidence, evidence, itit may may be be necessary necessary for the the court, in in considering considering alternative alternative reasonable reasonable interpretations of contract language, to resort to evidence of what one side in fact believed interpretations of contract language, to resort to evidence of what one side in fact believed the the obligation obligation to to be, be, coupled with with evidence evidence that that the other party knew or should have known of of such such
5 5 See Seeid. id.atat1601 1601(discussing (discussing allocation transaction costs to the “cheapest thethe allocation of of transaction costs to the “cheapest cost cost avoider”). 6 avoider”). 6 U.S. U.S.West, West,Inc. Inc.v.v.Time TimeWarner, Warner,Inc., Inc.,C.A. C.A.No. No.14555, 14555,1996 1996 Del. Ch. LEXIS55, 55, *30 (Del.Ch. Ch. Del. Ch. LEXIS at at *30 (Del. June June 6, note 1, 1, at at 1596. 1596. 6, 1996); 1996); Posner, Posner, supra supra note 7 7 U.S. U.S.West, West,1996 1996Del. Del.Ch. Ch.LEXIS LEXIS55, 55,atat*29-*30. 8 *29-*30. 8 See SeeEagle EagleIndus., Indus.,Inc. Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) a v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) (“If(“If a contract is contract is unambiguous, extrinsic evidence may not be used to interpret the intent of the parties, to vary the terms of of unambiguous, extrinsic evidence may not be used to interpret the intent of the parties, to vary the terms the contract or to create create an anambiguity.”). ambiguity.”). 9 9 See SeePeden Peden Gray, No. 188, 2005, 2005 Del. LEXIS 389, at *6 (Del. Oct. v.v.Gray, No. 188, 2005, 2005 Del. LEXIS 389, at *6 (Del. Oct. 14,14, 2005). 10 2005). 10Pellaton Pellatonv.v.Bank BankofofNew NewYork, York,592 592A.2d A.2d473, 473,478 478 (Del.1991). (Del. 11 1991). 11See SeePosner, Posner, supra note at 1603 as parties the parties choose whether toahave a written supra note 1, at1,1603 (“So(“So just just as the choose whether to have written contract and contract and whether to include an arbitration clause, they also choose whether to state that their contract is whether to include an arbitration clause, they also choose whether to state that their contract is integrated integrated and by so so doing doing to to limit limit further furtherthe the role role of ofthe thejury juryororjudge judgeas as the the trier trierof offact factand andthe the expense expense of litigating break down.”). down.”). litigating aa suit suit should should their contractual relationship break
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belief.”12 Applying the theforthright forthrightnegotiator negotiatorprinciple principleininsuch such a case, court would belief.”12 Applying a case, the the court would adopt the 13 adopt the meaning as understood by one side, but known to both meaning as understood by one side, but known to both parties. parties.13 Application goal of of minimizing social Application of of the the forthright forthright negotiator negotiator principle principle furthers furthers the goal transaction costs. costs. If Party A knows that Party B believes a contract to mean If Party A knows that Party B believes a contract to mean one thing, but Party A A believes believes itit to to mean mean another, another, Party Party A A can can resolve resolve this this ambiguity ambiguityat at the the lowest lowest cost cost ex ex ante. ante. Party A A need only disclose the ambiguity, while Party B would need to invest resources need ambiguity, while Party B would need to invest resources to even learn that an an ambiguity ambiguity exists. exists. By By adopting adopting the the forthright forthrightnegotiator negotiator principle, principle,the the courts courts have have essentially burden on on the the lowest lowest cost cost avoider avoider to to disclose disclose aa known known ambiguity ambiguity ex essentially placed placed a burden ex ante ante or, alternatively, alternatively, be be forced forced to to accept accept the the other other party’s party’s interpretation interpretationex expost post should should the the issue issue be be litigated. To observers, itit seems seemsParty PartyAA has hasbehaved behavedpoorly, poorly,even evenactionably actionablyso. so. From From this this To some some observers, view, recastthe theforthright forthright negotiator negotiator principle principle as an affirmative affirmative duty, view, itit isis but but aa short short step to recast as an owed by one one negotiator negotiator to to another. another. It is not. While there are any number of While there are any number of arguments arguments concluding that Party Party A A should should (or (or shouldn’t) shouldn’t) disabuse disabuseParty PartyBBof ofhis hisblissfully blissfully clarion clarion view view of an ambiguous ambiguousprovision, provision, the theforthright forthright negotiator negotiator principle principle is not one one of of them. them. Rather, it is simply a rule of construction.
12 12
U.S.West, West,1996 1996Del. Del.Ch. Ch. LEXIS55, 55,atat U.S. LEXIS *34-*35. 13 *34-*35. 13 Id. at Id. at *63-*64. *63-*64.
