Ambiguity means language in an agreement has more than one meaning. Cases such as this one from New York explain that ambiguity in the context of a contract is defined as “whether a reasonably intelligent person looking at the contract objectively could interpret the language in more than one way.” When a contract is ambiguous, the courts may turn to extrinsic evidence to determine the original intention of the parties to understand the meaning of the language in a contract.
Ambiguity can either be patent or latent. This case from Texas explains that patent ambiguity occurs when the language in the document itself has more than one meaning, whereas latent ambiguity is not readily visible, but arises when the language which is unambiguous is applied to the subject matter with which it deals, and ambiguity appears because of some external circumstances. For latent ambiguity, parol evidence may be used to understand the true intention of the parties as expressed in the agreement and thereby, understand the language of the latent ambiguity.
[Last updated in June of 2021 by the Wex Definitions Team]