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Different contract interpretations can lead to disputes

| Apr 9, 2021 | Commercial Real Estate |

Ideally, a commercial tenant and a landlord will both understand exactly what the contract means on the day that they sign. The reality, though, is that these two parties can both read the exact same contract and interpret it differently. If they do, this can lead to all manner of disputes.

One of the biggest problems, in this situation, is that both sides will honestly and completely think that they are correct in their interpretation. This is not the same as one person intentionally violating the contract and the other holding them accountable. They’ll both believe the other person was in the wrong, and so sorting out the legal realities can be tricky.

Terminating the contract

For example, consider a termination clause, which is present in most commercial leases. It stipulates how and why the contract can end.

The landlord may believe that the end date on the contract means they can absolutely terminate it on that date if they choose to do so. They may also have an option to let the tenant resign the contract for another year.

The tenant, on the other hand, may think that they are supposed to be given that option first and that the contract ends only if they choose not to renew it. You can see how difficult this could become if both parties arrive at the end of the contract and the landlord tells the tenant to move out. The tenant may feel that they are essentially being unfairly evicted when they wanted to sign up for another term, while the landlord may believe — perhaps correctly — that they get to decide if they want to offer that option or not.

How do you decide what happens next?

Having a clear contract is a good way to avoid disputes and ensure that everyone is on the same page, but you can see that even doing that won’t always work if there are interpretation issues. If you’re involved in a situation like this and you’re trying to decide what comes next, you must know exactly what legal options you have.

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