In the recent New Jersey Supreme Court case of Pacifico v. Pacifico, the contract doctrine of contra proferentem was discussed. This doctrine provides that when a contract term is ambiguous, a court must adopt the meaning that is most favorable to the nondrafting party.
In this particular case, the parties (husband and wife) had entered into a Property Settlement Agreement dealing the issues in their divorce case. With regard to the marital home, it was agreed that the parties would continue to own the marital home as joint tenants until it was sold at any one of certain triggering events. The wife was to have the first option to buy out the husband’s interest and the husband was to have the second option. If neither party wished to purchase the other party’s interest in the home, it would be sold.
When the younger son became emancipated, the wife offered to buy the husband’s share of the home at the value determined in 1996 – the date of the Property Settlement Agreement. The husband’s position was that the value should be set at the current fair market value.
The trial court held that the wife had the right to purchase the husband’s interest at the current fair market value. The Appellate Division reversed and held that the Property Settlement Agreement was ambiguous because it did not specify the date on which the property should be valued for buyout purposes. The Court stated that any ambiguity should be construed in the wife’s favor since the husband’s attorney drafted the Property Settlement Agreement.
The Supreme Court disagreed holding that the doctrine of contra proferentum should not have been applied here, where both parties attorneys were involved in different drafts of the agreement and where there was no unequal bargaining power between the parties.
The case was remanded back to the trial court for a determination of the parties’ intent and credibility.