By: Jordan Gerheim CEO – Outside Chief Legal LLC
Ambiguous contract language looks harmless until both sides discover they have very different ideas about what a clause means. That gap in understanding is often what turns an ordinary business relationship into an expensive dispute, strained partnership, and perhaps even litigation.
Courts can try to enforce the parties’ intent, but when the words are unclear, the process of interpreting a contract can require motion practice, discovery, and hearings on what the contract “really” means, all of which cost time and money.
Common Sources Of Ambiguity
Even careful drafters fall into patterns that create ambiguity:
- Undefined Key Terms: This is a big one. For example, phrases like “timely,” “prompt,” “standard,” or “material” with no definitions.
- Pronoun Confusion: Using “it,” “they,” or “their” when more than one party or concept is in play.
- Inconsistent Labels: Referring to the same party as “Company,” “Client,” and “Customer” in different sections.
- Copy‑And‑Paste Conflicts: Combining clauses from different templates without harmonizing definitions, effort standards, or timeframes.
- Silence On Important Processes: Leaving change orders, price adjustments, or renewals to informal understanding rather than written rules.
Each of these creates confusion and room for the other side to argue that the contract means something very different than you assumed.
Real‑World Style Examples Of Ambiguity In Action
Example 1: “Net Profits” With No Definition
Two partners sign a short agreement promising one of them “10% of net profits” from a new product line. The contract never defines “net profits.”
- One partner calculates net profits after deducting overhead, salaries, marketing, and shared expenses.
- The other believes only direct costs for that product line should be deducted.
Once the product becomes successful, this difference in interpretation leads to a dispute over tens of thousands of dollars. The missing definition becomes the centerpiece of the conflict.
Instead: Define financial terms precisely. List which revenues and which categories of expenses are included or excluded, and consider adding a simple example calculation as an exhibit.
Example 2: “Reasonable Efforts” vs “Best Efforts”
A technology vendor promises to use “best efforts” to complete an implementation by a certain date, but elsewhere the contract says the vendor will use “commercially reasonable efforts” to meet project milestones.
- The customer argues that “best efforts” means the vendor must prioritize this project and add resources to hit the deadline.
- The vendor insists that “best” and “reasonable” are effectively the same and delays are acceptable given other work.
The inconsistent standards make it hard to measure performance and easy to argue over what level of effort was required.
Instead: Choose one effort standard and use it consistently. If a higher standard is truly needed for a specific obligation, define what that means in practical terms (for example, “allocate additional staff as needed to meet the deadline, up to X hours per week”).
Example 3: Conflicting Termination Provisions
A services agreement says in one section that either party may terminate “for any reason on 30 days’ notice.” Another section says, “This agreement may not be terminated during the initial one‑year term except for material breach.”
- When the customer’s business changes, they send 30 days’ notice to terminate after six months.
- The vendor points to the one‑year clause and demands payment for the full year.
- Both sides have text they can point to and a dispute follows.
Instead: Read the contract as a whole and fix contradictions before signing. Use cross‑references (for example, “subject to the initial one‑year term described in Section 3”) so all sections are aligned.
Example 4: “Delivery Within A Reasonable Time”
A distributor agreement states that products will be “delivered within a reasonable time after order.” No further detail is provided.
- When demand is low, deliveries within 10–14 days feel fine.
- When demand spikes, the buyer expects three‑day turnaround; the distributor believes four weeks is still “reasonable.”
Neither side can point to a specific timeframe, so each falls back on what “reasonable” means in their own business. The gap in expectations turns into lost sales, finger‑pointing, and potential claims.
Instead: Replace vague timeframes with specific ones (for example, “within five business days of receipt of order”) and, if needed, include different timing for standard vs rush orders.
Example 5: Undefined “Major Customers”
An employee’s non‑solicitation clause prohibits them from doing business with the company’s “major customers” for one year after leaving, but the contract never explains what “major” means.
- The former employee believes it applies only to the top one or two accounts.
- The company insists it covers dozens of customers they consider “major.”
The phrase becomes the focus of a dispute over the scope and enforceability of the restriction.
Instead: Replace subjective labels with objective criteria, such as “any customer who generated at least $X in revenue in the twelve months before termination” or “the customers listed on Exhibit A.”
Example 6: “Standard” or “Industry‑Leading” Service
A marketing services contract promises “industry‑leading SEO services” and “standard reporting,” but gives no details on reporting frequency, content, or performance metrics.
- The client expects detailed weekly reports and clear ranking improvements.
- The agency believes monthly summaries are enough and that rankings will fluctuate.
The vague promises provide little guidance on whether the agency met its obligations.
Instead: Pair marketing language with concrete obligations. For reporting, specify frequency, format, and basic contents. For performance, focus on process and deliverables (for example, number of campaigns, posts, or updates) rather than vague outcome guarantees.
How Outside Chief Legal Helps Avoid Ambiguity‑Driven Disputes
Many costly disputes stem from ordinary words used in unclear ways, not from exotic legal doctrines. Outside Chief Legal helps companies:
- Spot vague or conflicting provisions in contracts before they are signed.
- Translate business expectations into clear, enforceable contract language.
- Build standard agreements and clause “playbooks” so your customer, vendor, and partner contracts speak the same language and manage risk consistently.
As outside general counsel, the goal is to reduce surprises, preserve relationships, and keep you out of avoidable disputes by getting the language right from the start.
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