When there is doubt, a contract is interpreted in favor of the party who assumed the obligation.
Many companies adopt as a guiding principle that the contracts they sign be thought out, prepared, and seasoned by their advisors.
Thus, a company with an urgent need for capital is solicited by a business incubation center to assist in its quest for funds, in exchange for certain royalties calculated as a percentage of revenue. After a few months, the company, on the verge of bankruptcy and unable to secure the desired financing, chooses to sell all of its assets. The acquirer does not assume any of the commitments that the company has entered into with the incubation center and declares bankruptcy shortly thereafter. The center sues the company and its directors for breach of contract.
The Court of Appeal* dismisses the claims of the incubation center because they do not align with the parties' intention at the time of contract signing. When there is doubt, a contract is interpreted in favor of the party that undertook the obligation, especially if the contract was prepared exclusively by one party, as the doctrine interprets it in favor of the other party in case of doubt.
It is undoubtedly risky to try to concoct contracts according to a strict recipe without considering the other party's understanding. A judge may add an ingredient that could give it a bittersweet flavor.
*C.A. 500-09-001088-954, 1998-12-07
