In an ideal world, the wording of contracts would be clear, easy
to read and unambiguous. Ambiguity in contracts leads to disputes
about the intended meaning or interpretation where one or both
parties assert that more than one interpretation is possible. It is
an unfortunate fact, however, that despite the efforts of even the
best contract drafter, no contract will be perfectly clear, and
every contract will contain some ambiguity.
Chief Justice Knox of the High Court of Australia has described
this by saying that "experience shows that the words of
many, if not most, documents are capable... of more than one
meaning." Accordingly, it is essential that ambiguity is
managed effectively. For example, special provisions may be
inserted into a contract to ensure that in interpreting ambiguous
clauses, the meaning which best favours one or other of the
contractual parties is the one which is ultimately adopted. This
article provides guidance as to how the courts resolve
