The Importance of Specific and Measurable Contract Provisions in Litigation
When there is a contract dispute that ends up in litigation, the court will generally enforce unambiguous contract provisions explicitly, especially where the contract is between two sophisticated parties. Explicit contract provisions are one of the main benefits to entering into a contract for the parties – a contract that clearly sets forth the rights and obligations of each party in concrete terms and unambiguous language is more likely to be ruled on by a court at the motion to dismiss or summary judgment stage as a matter of law, sparing the parties the cost and uncertainty of a trial. But what happens when the terms of a contract contain ambiguous terms or, more often, explicit terms that require significant fact-finding and interpretation? In those instances, the parties to the contract are far more likely to find themselves in lengthy (and costly) litigation.
An example of such a case is First Niagara Bank N.A. v Mtge. Bldr. Software, Inc., 2016 US Dist LEXIS 67705 (WDNY May 22, 2016, No. 13-CV-592S), where one of the issues before the Court on summary judgment was whether First Niagara properly terminated a Service Agreement with the Defendant (and my client) MBSI. Specifically, First Niagara purportedly terminated the Service Agreement under a provision which allows First Niagara to terminate “if the Services are not fully operational after a certain date and if First Niagara has ‘reasonably cooperate[d] in good faith’ on the implementation of the software.’” First Niagara at *17. Thus, whether First Niagara reasonably cooperated in good faith was an explicit term of the contract, and was thus a material issue in the determination of whether either party breached the Service Agreement. The Court concluded that “[t]he record in the present case is heavily fact-laden, with disputes arising over numerous individual pieces of evidence and their import, each contributing to this genuine issue of material fact. Because First Niagara and MBSI each offer reasonable alternative and conflicting arguments as to whether termination was proper, neither party is entitled to summary judgment on its breach of contract claim, nor is either party entitled to summary judgment dismissing the claim against it.” First Niagara at * 20-21.