Title: CRAIG A KLAPP V UNITED INSUR GROUP AGENCY INC
Citation: N/A
Docket Number: 119176
State: Michigan
Issuer: Michigan Supreme Court
Date: June 18, 2003

____________________________________________________________________________________________ 
____________________________________________________________________________________________________________________________ 
                                          
Michigan Supreme Court
Lansing, Michigan 48909 
Chief Justice 
Justices 
Maura D. Corrigan 
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED JUNE 18, 2003  
CRAIG A. KLAPP,  
Plaintiff-Appellant,  
v 
Nos. 119175, 119176  
UNITED INSURANCE GROUP AGENCY, INC,  
Defendant-Appellee.  
BEFORE THE ENTIRE BENCH  
MARKMAN, J.  
We granted leave to appeal in this case to consider  
whether defendant breached the parties’ written contract by  
refusing to pay plaintiff retirement renewal commissions on  
insurance policies that plaintiff sold on behalf of defendant  
while plaintiff was working for defendant.  The trial court  
denied defendant’s motion for summary disposition.  It  
concluded that the contract was ambiguous and, thus, that its  
interpretation raised a question of fact that must be decided  
by 
the 
jury, 
which 
could consider relevant extrinsic evidence.  
The jury found in favor of plaintiff.  The Court of Appeals  
reversed, concluding that the contract unambiguously stated  
that an agent must be at least sixty-five years old and have  
worked at least ten years for defendant in order to qualify  
for retirement renewal commissions and, therefore, that the  
trial court erred in not granting defendant’s motion for  
summary disposition.  Because we agree with the trial court  
that the language of this contract is ambiguous and, thus,  
that its interpretation raises a question of fact for the jury  
to determine in light of relevant extrinsic evidence, we  
reverse the judgment of the Court of Appeals and remand this  
case to the Court of Appeals for consideration of defendant’s  
other appellate issue and plaintiff’s cross-appeal.1  
I. FACTS AND PROCEDURAL HISTORY  
When plaintiff began working as an insurance agent for  
defendant in 1990, they entered into a contract, titled the  
“Agent’s Agreement.”  Plaintiff permanently stopped working  
1 Specifically, on remand, the Court of Appeals shall 
consider defendant’s alternative argument that the damages 
award 
was 
based 
on 
improper speculation about policy renewals, 
and plaintiff’s cross-appeal, which challenged the trial 
court’s dismissal of his claim for double damages and actual 
attorney fees under the sales representative commissions act. 
MCL 600.2961.  
2  
 
for defendant in 1997.2  Plaintiff brought this action,  
alleging that defendant failed to pay renewal commissions to  
which plaintiff was entitled pursuant to the vesting schedule  
in their contract that provided that an agent with seven years  
of service is entitled to the vesting of one hundred percent  
of his renewals.3  After discovery, defendant brought a motion  
for summary disposition pursuant to MCR 2.116(C)(10),  
contending that, in order for renewal commissions to be vested  
on the basis of retirement, one must be at least sixty-five  
years old and have worked for defendant for at least ten  
years.4  The trial court denied defendant’s motion for summary  
disposition,5 finding the contract to be ambiguous,6  and the  
2 In 1994, plaintiff stopped working for defendant for 
about six months.  When plaintiff returned to work for 
defendant, he was given credit for his prior work for 
defendant pursuant to the vesting schedule in their contract.  
Plaintiff permanently stopped working for defendant in 
April of 1997.  However, defendant did not become aware of 
this until August of 1997.  Apparently, plaintiff did not 
inform defendant that he was not going to work for defendant 
any longer.  Once defendant noticed that plaintiff was not 
generating any new business, it sent plaintiff a letter 
declaring their contract terminated and stopped paying  
plaintiff renewal commissions.  
3 That defendant had accrued seven years of service as an 
agent with defendant is undisputed.  
4 That defendant was in his mid-forties when he stopped 
working for defendant is undisputed.  
5 However, the trial court did grant defendant’s motion 
for summary disposition with regard to plaintiff’s second 
(continued...)  
3  
jury subsequently found in favor of plaintiff.7  The Court of  
Appeals 
then 
reversed, 
concluding 
that 
the 
contract  
unambiguously requires that an agent must be at least sixty­
five years old and have worked at least ten years for  
defendant in order to qualify for retirement renewal  
commissions.8  We granted plaintiff’s application for leave to  
appeal.9  
5(...continued) 
count seeking double damages and attorney fees under the sales 
representative commissions act, MCL 600.2961, concluding that 
the SRCA does not apply to insurance sales agents.  
6 Although the trial court stated, in a written opinion, 
“it is an issue for the trier of fact to determine whether or  
not the language of the contract and actions by the parties 
render an ambiguous or unambiguous contract,” the court’s 
final instructions to the jurors told them to consider both 
the contract and the relevant extrinsic evidence, and then 
decide what the contract meant.  The court did not instruct  
the jurors to determine whether the contract was ambiguous.  
7 The jury awarded plaintiff $45,882 in renewal  
commissions for the period from August 1997 through the 
January 1999 trial, and one hundred percent of all future 
renewal commissions as they accrue.  
8 Unpublished opinion per curiam, issued February 9, 2001 
(Docket Nos. 219299, 219330).  The Court of Appeals did not 
address defendant’s alternative argument that the damages 
award was based on improper speculation about policy renewals 
or plaintiff’s cross-appeal, which challenged the trial 
court’s dismissal of his SRCA claim for double damages and 
attorney fees.  
9 We directed the parties to include among the issues to 
be briefed: “Where, as in the present case, a contract is 
drafted entirely by one party, without any bilateral  
negotiations, is extrinsic evidence admissible to clarify 
(continued...)  
4  
  
II. STANDARD OF REVIEW  
We review de novo a trial court’s ruling on a motion for  
summary disposition.  Stanton v Battle Creek, 466 Mich 611,  
614; 647 NW2d 508 (2002).  Similarly, whether contract  
language is ambiguous is a question of law that we review de  
novo. Farm Bureau Mut Ins Co v Nikkel, 460 Mich 558, 563; 596  
NW2d 915 (1999).  Finally, the proper interpretation of a  
contract is also a question of law that we review de novo.  
Henderson v State Farm Fire & Cas Co, 460 Mich 348, 353; 596  
NW2d 190 (1999).  
III. ANALYSIS  
The Agent’s Agreement at issue here provides in relevant  
part:  
5. Vested Commissions. Commissions shall be  
vested in the following manner:  
(A) Death, disability, or retirement during  
term hereof. 
Upon the death, disability, or 
retirement (as those terms shall be then defined in 
the Agent’s Manual) of Agent at any time prior to 
the termination of this Agreement, Agent (or 
Agent’s designated death beneficiary who shall be 
designated by Agent in writing; or in the absence 
of such written designation, Agent’s estate) shall 
thereafter be entitled to receive one hundred  
percent (100%) of such renewal commissions then 
payable from premiums on Agent’s policies in place, 
in such amounts as would otherwise have been  
payable to Agent, until the aggregate renewals  
9(...continued) 
ambiguity in the contract or is any ambiguity in the contract 
simply to be construed against the drafter (without 
considering any extrinsic evidence)?” 467 Mich 867 (2002).  
5  
 
payable to Agent thereon shall equal less than 
Forty-One Dollars and Sixty-Seven Cents ($41.67) 
per month. If upon the date of death, disability, 
or retirement, Agent shall have aggregated eight 
(8) or more years of service under this Agreement, 
his then vesting shall be determined in accordance 
with the normal vesting schedule.  
(B) Vesting Schedule.  In the event of a  
termination of this Agreement for reasons of death, 
disability and retirement (as defined in the  
Agent’s Manual), Agent as set forth below on the 
date of execution hereof shall be entitled to  
receive a percentage of renewal commissions then 
payable from premiums on Agent’s policies in place, 
applicable to such amounts as would otherwise have 
been payable to Agent in accordance with the 
following vesting schedule:  
Agent’s Years 
% of  
of Service 
Renewals Vested  
Less than 2 years
 0%  
2 years 
10%  
3 years 
30%  
4 years 
50%  
5 years 
70%  
6 years 
90%  
7 years
 100%  
8 years
 110%  
9 years
 120%  
10 years
 130%  
11 years
 140%  
12 years
 150%  
With regard to retirement, the Agent’s Manual provides:  
Retirement is understood to be disengagement  
from 
the 
insurance 
industry. 
Vestment 
for  
retirement is age 65 or 10 years of service 
whichever is later.  
When defendant moved for summary disposition, it argued  
that plaintiff was not entitled to renewal commissions  
because, although plaintiff had disengaged from the insurance  
6  
industry, he was not at least sixty-five years old and had not  
worked for defendant for at least ten years, whereas the  
contract unambiguously required an agent to satisfy all three  
of these requirements in order to be eligible for retirement  
renewal commissions. Defendant further argued that, because  
the contract was unambiguous, extrinsic evidence may not be  
considered in interpreting the contract.  
Plaintiff, on the other hand, argued that the contract  
was ambiguous because the vesting schedule in § 5(B) of the  
Agent’s Agreement conflicts with the sixty-five years of age  
and ten years of service requirements in the Agent’s Manual.  
That is, under the vesting schedule, a percentage of renewal  
commissions were vested after two years of service, while,  
under 
the 
Agent’s 
Manual’s definition of retirement, which the  
Agent’s Agreement incorporated, renewal commissions were not  
vested at all until an agent reached sixty-five years of age  
and had served as an agent with defendant for ten years.  
Plaintiff further argued that, because this contract was  
ambiguous, its interpretation was a question of fact that must  
be decided by the jury in light of relevant extrinsic  
evidence.  As already noted, the trial court agreed with  
plaintiff that the contract was ambiguous and, thus, must be  
interpreted by the jury in light of relevant extrinsic  
7  
 
 
evidence.10  
On appeal to the Court of Appeals, plaintiff argued that  
the early years of the vesting schedule (years two through  
nine) directly conflicted with the sixty-five years of age and  
ten years of service requirements, creating an ambiguity that  
the jury properly resolved against defendant. Defendant, on  
the other hand, argued that years two through nine of the  
vesting schedule should be ignored.  The Court of Appeals,  
correctly recognizing that years two through nine of the  
vesting schedule had to be given some meaning, but disagreeing  
with plaintiff that they applied to agents who had retired,  
concluded that these years of the vesting schedule only  
applied to agents who died or had become disabled.  Plaintiff  
filed a motion for rehearing, arguing that the Court of  
Appeals had overlooked § 5(A) of the Agent’s Agreement, which  
provided that, regardless of age or years of service, an agent  
who died or became disabled while still employed was entitled  
10 As also noted above, n 6, the trial court did not 
clearly express this conclusion.  In fact, when the trial 
court denied defendant’s motion for summary disposition, the 
trial court actually stated that it was up to the jury to 
determine whether the contract was ambiguous. However, when 
it came time to instruct the jury, the trial court told the 
jury to consider the contract and the relevant extrinsic 
evidence and to decide what the contract meant.  These  
instructions 
make 
reasonably clear that the trial court itself 
must have determined that the contract was ambiguous and, 
thus, that it was up to the jury to determine the meaning of 
the contract, with the use of relevant extrinsic evidence 
being permissible.  
8  
 
to receive one hundred percent of his renewal commissions.  
Therefore, plaintiff argued, the Court of Appeals erred in  
concluding that years two through nine of the vesting schedule  
applied to agents who died or became disabled. The Court of  
Appeals denied plaintiff’s motion for rehearing without  
explanation.  
A. THE CONTRACT LANGUAGE IS AMBIGUOUS  
“An insurance contract is ambiguous when its provisions  
are 
capable 
of 
conflicting interpretations.”  Nikkel, 
supra at  
566.
 Accordingly, if two provisions of the same contract  
irreconcilably conflict with each other, the language of the  
contract is ambiguous. Further, courts cannot simply ignore  
portions of a contract in order to avoid a finding of  
ambiguity or in order to declare an ambiguity.  Instead,  
contracts must be “‘construed so as to give effect to every  
word or phrase as far as practicable.’”  Hunter v Pearl  
Assurance Co, Ltd, 292 Mich 543, 545; 291 NW 58 (1940),  
quoting Mondou v Lincoln Mut Cas Co, 283 Mich 353, 358-359;  
278 NW 94 (1938).  
In our judgment, the vesting schedule found in § 5(B) of  
the Agent’s Agreement irreconcilably conflicts with the  
Agent’s Manual’s definition of retirement, which the Agent’s  
Agreement incorporates.  Under the vesting schedule, an agent  
who has served two or more years with defendant is entitled to  
9  
 
a percentage of renewal commissions; while, under the Agent’s  
Manual’s definition of retirement, an agent is only entitled  
to a percentage of renewal commissions if that agent is at  
least sixty-five years old and has served ten or more years  
with defendant. Accordingly, while plaintiff is entitled to  
renewal commissions under the vesting schedule, he is not  
entitled to renewal commissions under the Agent’s Manual’s  
definition of retirement.  Therefore, the language of the  
contract is ambiguous.  
The Court of Appeals attempted to avoid a finding of  
ambiguity by concluding that, if an agent has less than ten  
years of service with defendant, he cannot be considered  
retired and, thus, years two through nine of the vesting  
schedule would not apply to him; however, these years would  
apply to an agent who died or became disabled without reaching  
the age of sixty-five and without having ten years of service  
with defendant. Although the Court of Appeals is correct in  
recognizing that it must give some meaning to years two  
through nine of the vesting schedule, in its attempt to give  
these years some meaning, it has ignored another portion of  
the contract, that is, § 5(A) of the Agent’s Agreement.  Just  
as “[c]ourts must give effect to every word, phrase, and  
clause in a statute and avoid an interpretation that would  
render any part of the statute surplusage or nugatory,” State  
10  
 
  
Farm & Cas Co v Old Republic Ins Co, 466 Mich 142, 146; 644  
NW2d 715 (2002), courts must also give effect to every word,  
phrase, and clause in a contract and avoid an interpretation  
that would render any part of the contract surplusage or  
nugatory.  
Section 5(A) of the Agent’s Agreement provides that an  
agent who dies or becomes disabled is automatically one  
hundred 
percent 
vested.  Therefore, contrary to the contention  
of the Court of Appeals, years two through nine of the vesting  
schedule, which provide for less than one hundred percent  
vesting, would have no application to an agent who dies or  
becomes disabled.  If the contract is read, as the Court of  
Appeals read it, to require an agent to be at least sixty-five  
years old and to have served as an agent for defendant for at  
least ten years to be considered retired, years two through  
nine of the vesting scheduled are rendered meaningless.  
Because there is no way to read the provisions of this  
contract in reasonable harmony, the language of the contract  
is ambiguous.  
B. INTERPRETATION OF AMBIGUOUS CONTRACT  
It is well settled that the meaning of an ambiguous  
contract is a question of fact that must be decided by the  
jury. Hewett Grocery Co v Biddle Purchasing Co, 289 Mich 225,  
236; 286 NW 221 (1939).  “‘Where a contract is to be construed  
11  
 
by its terms alone, it is the duty of the court to interpret  
it; but where its meaning is obscure and its construction  
depends upon other and extrinsic facts in connection with what  
is 
written, 
the 
question of interpretation should be submitted  
to the jury, under proper instructions.’”  O’Connor v March  
Automatic Irrigation Co, 242 Mich 204, 210; 242 NW 784  
(1928)(citation omitted).  
Where a written contract is ambiguous, a 
factual question is presented as to the meaning of 
its provisions, requiring a factual determination 
as to the intent of the parties in entering the 
contract.  Thus, the fact finder must interpret the 
contract’s terms, in light of the apparent purpose 
of the contract as a whole, the rules of contract 
construction, and extrinsic evidence of intent and 
meaning.  [11 Williston, Contracts (4th ed), § 
30:7, pp 87-91.]  
In resolving such a question of fact, i.e., the  
interpretation of a contract whose language is ambiguous, the  
jury is to consider relevant extrinsic evidence.  As this  
Court explained in Penzien v Dielectric Products Engineering  
Co, Inc, 374 Mich 444, 449; 132 NW2d 130 (1965):  
“If the contract in question were ambiguous or 
‘doubtful,’ 
extrinsic 
evidence, 
particularly 
evidence which would indicate the contemporaneous 
understanding of the parties, would be admissible 
as an aid in construction of the disputed terms.”  
“The law is clear that where the language of 
the contract is ambiguous, the court can look to 
such extrinsic evidence as the parties’ conduct, 
the statements of its representatives, and past 
practice to aid in interpretation.”  [Citations 
omitted.]  
12  
 
  
  
  
Looking at relevant extrinsic evidence to aid in the  
interpretation of a contract whose language is ambiguous does  
not violate the parol evidence rule.  
“The parol evidence rule does not preclude the 
admission of parol or extrinsic evidence for the 
purpose 
of 
aiding 
in 
the 
interpretation 
or  
construction of a written instrument, where the 
language of the instrument itself taken alone is 
such that it does not clearly express the intention 
of the parties or the subject of the agreement. 
Such evidence is admitted not to add to or detract  
from the writing, but merely to ascertain what the 
meaning of the parties is. 
Thus a written  
instrument is open to explanation by parol or 
extrinsic evidence when it is expressed in short 
and incomplete terms, or is fairly susceptible of 
two constructions, or where the language employed 
is vague, uncertain, obscure, or ambiguous, and 
where the words of the contract must be applied to 
facts ascertainable only by extrinsic evidence, a 
resort to such evidence is necessarily permitted.” 
[Edoff v Hecht, 270 Mich 689, 695-696; 260 NW 93 
(1935)(citation omitted).]  
In interpreting a contract whose language is ambiguous,  
the jury should also consider that ambiguities are to be  
construed against the drafter of the contract.11 
Herweyer v  
11 In this case, the trial court instructed the jury that 
it should consider relevant extrinsic evidence and that any 
ambiguities should be construed against the drafter of the 
contract. Specifically, the trial court instructed the jury 
to  
consider the words of the contract as well as the  
parties’ actions.  
In determining whether renewal commissions are  
due to Mr. Klapp, you should consider the  
interpretation that the parties themselves had 
given to the Agent’s Agreement used by United 
(continued...)  
13  
 
 
Clark Hwy Services, Inc, 455 Mich 14, 22; 564 NW2d 857  
(1997).12  This is known as the rule of contra proferentem.  
However, this rule is only to be applied if all conventional  
means of contract interpretation, including the consideration  
of relevant extrinsic evidence, have left the jury unable to  
determine what the parties intended their contract to mean.13  
Accordingly, if the extrinsic evidence indicates that the  
parties intended their contract to have a particular meaning,  
this is the meaning that should be given to the contract,  
regardless of whether this meaning is in accord with the  
drafter’s or the nondrafter’s view of the contract.  In other  
words, if a contract is ambiguous regarding whether a term  
11(...continued) 
Insurance for Mr. Klapp and other agents.  
* * *  
Provisions in the Agent’s Agreement or Agent 
Manual which are ambiguous or unclear should be 
interpreted against the party that drafted the 
document, in this case, United Insurance.  This  
means that you should resolve any doubt or  
ambiguity in the document itself against United 
Insurance and in favor of Mr. Klapp.  
12 “This rule 
is 
frequently described under the Latin term  
of contra proferentem, literally, against the offeror, he who 
puts forth, or proffers or offers the language.” Williston,  
supra, § 32:12, pp 472-475.  
13 
Although 
extrinsic 
evidence 
cannot 
resolve 
an 
ambiguity 
in the sense that it can transform ambiguous contract language 
into unambiguous contract language, extrinsic evidence may 
help the jury determine what the parties to a contract 
intended the ambiguous contract language to mean.  
14  
means “a” or “b,” but relevant extrinsic evidence leads the  
jury to conclude that the parties intended the term to mean  
“b,” then the term should be interpreted to mean “b,” even  
though construing the document in the nondrafter’s favor  
pursuant to an application of the rule of contra proferentem  
would produce an interpretation of the term as “a.”  
However, if the language of a contract is ambiguous, and  
the jury remains unable to determine what the parties intended  
after considering all relevant extrinsic evidence, the jury  
should only then find in favor of the nondrafter of the  
contract pursuant to the rule of contra proferentem.  In other  
words, the rule of contra proferentem should be viewed  
essentially as a “tie-breaker,” to be utilized only after all  
conventional means of contract interpretation, including the  
consideration of relevant extrinsic evidence, have been  
applied and found wanting.  
This view of the rule of construing against the drafter  
of the contract is in accordance with the 2 Restatement  
Contracts, 2d, § 206, p 105, which provides:  
In choosing among the reasonable meanings of a 
promise or agreement or a term thereof, that 
meaning is generally preferred which operates 
against the party who supplies the words or from 
whom a writing otherwise proceeds.  
The comments following this rule state that “[i]n cases of  
doubt, therefore, so long as other factors are not decisive,  
15  
 
 
there is substantial reason for preferring the meaning of the  
other party. . . .” Id. “[T]he rule is ‘the last one to be  
resorted to, and never to be applied except when other rules  
of interpretation fail.’”  Id., Reporter’s Note, p 106,  
citation omitted.  Treatises also indicate that this is a so­
called “rule of last resort.”  For example, 5 Corbin,  
Contracts (Rev ed, 1998), § 24.27, pp 297-300, provides:  
The 
“contra 
proferentem” 
rule 
has 
been  
described as being applicable only as a last  
resort, when other techniques of interpretation and 
construction have not resolved the question of 
which of two or more possible reasonable meanings 
the court should choose.  One court wrote that it  
is “a tie breaker when there is no other sound  
basis for choosing one contract interpretation over 
another.”  . . . Another federal court expressed a 
similar reservation concerning use of the rule: 
“[T]his rule of construction should not be enlarged 
to [clarify] perfunctorily . . . an ambiguous 
meaning; the trier of fact should still consider 
the drafting party’s evidence.” 
The “contra  
proferentem” rule thus yields to other techniques 
of interpretation, including the attempt to give a 
valid, legal, and reasonable meaning to as many of 
the contract terms as possible. 
[Citations 
omitted.]  
In addition, Williston, supra, § 32:12, pp 480-482, provides:  
The rule of contra proferentem is generally 
said to be a rule of last resort and is applied 
only where other secondary rules of interpretation 
have failed to elucidate the contract’s meaning. . 
. . Finally, the rule does not justify a court in 
adopting 
an 
interpretation 
contrary 
to 
that  
asserted by the drafter, simply because of his or 
her status as the drafter.  Rather, it is only when 
consistent 
with 
the 
rules 
of 
contract  
interpretation, 
the 
meaning 
proposed 
by 
the  
nondrafter (or an altogether different meaning 
determined by the court) is reasonable—when there  
16  
 
 
 
is a true ambiguity and the court must choose 
between two or more reasonable meanings—that the 
rule of contra proferentem is properly invoked.  
The rule of contra proferentem is a rule of last resort  
because, 
“The 
primary 
goal 
in 
the 
construction 
or  
interpretation of any contract is to honor the intent of the  
parties,” Rasheed v Chrysler Corp, 445 Mich 109, 127 n 28; 517  
NW2d 19 (1994), and the rule of contra proferentem does not  
aid in determining the parties’ intent.  Instead, the comments  
after the restatement refer to the rule of contra proferentem,  
not as a rule of interpretation, but as “a rule of legal  
effect.”  2 Restatement, supra at 105.  It is a rule of legal  
effect, rather than a rule of legal interpretation, because  
its purpose is not to render more accurate or more perfect a  
jury’s understanding of the meaning of the contract, but is  
merely to ascertain the winner and the loser in connection  
with a contract whose meaning has eluded the jury despite all  
efforts to apply conventional rules of interpretation.  As  
stated in Corbin, supra, p 306:  
The 
rule 
is 
not 
actually 
one 
of  
interpretation, because its application does not 
assist in determining the meaning that the two 
parties gave to the words, or even the meaning that 
a reasonable person would have assigned to the 
language used.  It is chiefly a rule of policy, 
generally favoring the underdog.  It directs the  
court to choose between two or more possible 
reasonable meanings on the basis of their legal 
operation, i.e., whether they favor the drafter or 
the other party.  
17  
 
In sum, the jury can consider relevant extrinsic evidence as  
an aid in interpreting a contract whose language is ambiguous.  
However, if, after the jury has applied all other conventional  
means of contract interpretation and considered the relevant  
extrinsic evidence, the jury is still unable to determine what  
the parties intended, the jury should then construe the  
ambiguity against the drafter.  That is, the rule of contra  
proferentem is only to be applied if the intent of the parties  
cannot be discerned through the use of all conventional rules  
of interpretation, including an examination of relevant  
extrinsic evidence.  
The concurring opinion asserts that, “when a contract is  
drafted entirely by one party, without any bilateral  
negotiations,” the rule of contra proferentem “should be  
applied as the primary rule of construction, not as a last  
resort . . . .”  Post at 1-2. That is, when a contract whose  
language 
is 
ambiguous 
is 
drafted 
without 
bilateral  
negotiations, a jury should not be allowed to look at relevant  
extrinsic evidence in order to discern the parties’ intent.  
Instead, the ambiguous language is simply to be construed  
against the drafter.  
We respectfully disagree with the concurring opinion’s  
reference to the rule of contra proferentem as a “rule of  
construction.”
 In our judgment, the rule of contra  
18  
 
proferentem is not a rule of construction, rather, as  
explained above, it is a rule of legal effect.  See pp 17-18.  
While rules of construction are designed to help determine the  
parties’ intent, the rule of contra proferentem is designed to  
resolve a dispute where the parties’ intent cannot be  
determined.  
Further, as the concurring opinion correctly states,  
“[t]he ultimate objective in interpreting an ambiguous  
contract is to ascertain the intent of the parties . . . .”  
Post at 3. Therefore, in our judgment, it is only obvious  
that a method of construing a contract that helps ascertain  
the intent of the parties should be preferred over one that  
does not.14
 We agree with the concurring opinion that  
extrinsic evidence “‘provides an incomplete guide with which  
to interpret contractual language.’” Post at 4. 
That is,  
14 Although the concurring opinion recognizes that “[t]he 
ultimate 
objective 
in interpreting an ambiguous contract is to 
ascertain the intent of the parties,” post at 3, it ultimately 
concludes that the “public-policy” interests in “provid[ing] 
a strong incentive for a party drafting a contract to use 
clear and unambiguous language” and to avoid “more involved 
litigation,” somehow overrides this “ultimate objective.” 
Post at 4-5. That is, the concurring opinion concludes that 
the rule of contra proferentem should be applied as “the 
primary rule of construction,” post at 2, because it allegedly 
furthers these latter two interests, although to apply it, as 
we do, as a rule of last resort is more in accord with the 
“ultimate objective in interpreting an ambiguous contract” 
because, as explained above, while the rule of contra  
proferentem does not help determine the parties’ intent, 
actual rules of construction, such as looking at relevant 
extrinsic evidence, do.  
19  
 
extrinsic evidence is not the best way to determine what the  
parties intended.  Rather, the language of the parties’  
contract is the best way to determine what the parties  
intended.  However, where, as in cases such as this one, it is  
not possible to determine the parties’ intent from the  
language of their contract, the next best way to determine the  
parties’ intent is to use relevant extrinsic evidence. Such  
evidence at least affords a way by which to ascertain the  
parties’ intent, unlike the rule of contra proferentem, which  
focuses solely on the status of the parties to a contract.15  
Finally, we disagree with the concurring opinion’s  
contention that “this Court has consistently applied the rule  
of construing against the drafter as the primary tool of  
construction . . . .” Id. at 6. Not one of the cases cited  
in the concurring opinion, in fact, concludes that relevant  
extrinsic evidence is inadmissible to help a jury determine  
the parties’ intent where the language of a contract is  
ambiguous.  In other words, not a single one of these cases  
concludes that the rule of contra proferentem is somehow a  
“primary rule of construction.”  Instead, in each of these  
15 Regardless of whether a contract is drafted with or 
without bilateral negotiations, looking at relevant extrinsic 
evidence to help determine the parties’ intent where their 
contractual language is ambiguous better comports with the 
ultimate goal of “honor[ing] the intent of the parties,” 
Rasheed, supra at 127 n 28, than does the rule of contra  
proferentem.  
20  
 
cases, the rule of contra proferentem was, in all likelihood,  
applied because there was no way to determine the parties’  
intent.  That is, the language of the contract was ambiguous,  
but there was no relevant extrinsic evidence available.16  
Therefore, 
the 
concurring opinion’s reliance on these cases is  
misplaced.17  
In this case, plaintiff introduced as extrinsic evidence  
an older version of the Agent’s Agreement and deposition  
testimony 
from 
defendant’s 
executives 
showing 
that 
defendant’s  
past practice had been to pay former agents the renewal  
16 As the concurring opinion points out, these cases do 
not address whether a jury should be allowed to examine 
relevant extrinsic evidence when interpreting an ambiguous 
contract or whether the rule of contra proferentem should be 
applied as the “only [] tool of construction in resolving 
ambiguous contracts.”  Post at 7 n 3.  Presumably, this issue 
was not addressed because it was not in question.  That is, 
the parties in those cases did not attempt to introduce 
relevant 
extrinsic 
evidence.  However, because these cases did 
apply the rule of contra proferentem, the concurring opinion 
assumes that the Court in those cases applied this rule as the 
“primary rule of construction.” In our judgment, a far more 
likely explanation is that the Court viewed the rule of contra 
proferentem, not as the only tool of construction in resolving 
all ambiguous contracts, but as the only tool available to 
resolve these ambiguous contracts.  
17 In fact, in one of the cases cited in the concurring 
opinion, this Court specifically stated that “[i]f the 
language of a contract is ambiguous, the court’s duty is to 
look beyond the bare language of the agreement to determine 
its meaning.” Stine v Continental Casualty Co, 419 Mich 89, 
112; 349 NW2d 127 (1984).  In this case, this Court further 
stated that “[c]ommon sense suggests that extrinsic evidence, 
including parol evidence, should be admissible to clarify the 
meaning of any ambiguous contract . . . .” Id. at 112 n 7.  
21  
  
commissions specified by § 5(B) of the vesting schedule,  
regardless of whether those agents had ten years of service  
with defendant or had reached age sixty-five.  
Plaintiff argues that the definition of retirement under  
the contract is simply “disengagement from the insurance  
industry” and that the second sentence under the section  
defining retirement in the Agent’s Manual was unintentionally  
left over from a time before defendant’s Agent’s Agreement  
contained a vesting schedule.  Not only does this construction  
of the contract accord meaning to the entire vesting schedule,  
but it is also the construction that defendant itself has  
applied for the past eight years, that is, since it adopted  
the new Agent’s Agreement containing the vesting schedule.18  
In other words, defendant had been paying the specified  
percentages of renewal commissions to agents, who were not  
sixty-five years of age and had not worked for defendant for  
at least ten years, as long as they had disengaged from the  
insurance industry.19  
Defendant 
argues that the jury should not have considered  
18 The new Agent’s Agreement containing the vesting 
schedule was adopted in 1989, and defendant applied the 
vesting schedule to agents who were not at least sixty-five 
years old and who had not served as agents for defendant for 
at least ten years until 1997.  
19 Defendant argues that its payment of such commissions 
had been a mistake on its part.  
22  
this extrinsic evidence.  However, as discussed above, the  
jury is to consider relevant extrinsic evidence when  
interpreting a contract whose language is ambiguous.  How the  
drafting party has interpreted ambiguous contractual language  
in the past is certainly relevant in determining what the  
parties intended such language to mean.  The meaning of a  
provision in a contract whose language is ambiguous “must be  
ascertained in the light of all of the relevant circumstances,  
. . . including, . . . the meanings accepted by the parties.”  
Davis v Kramer Bros Freight Lines, Inc, 361 Mich 371, 375; 105  
NW2d 29 (1960).  “There is no doubt that evidence of practical  
interpretation by the parties is admissible as an aid in the  
determination of the meaning to be given legal effect.” Id.  
at 375-376.  
Where parties by such a uniform course of  
conduct for a long time have given a contract a 
particular construction, that construction will be 
adopted by the courts.  
“The 
practical 
interpretation 
given 
to  
contracts by the parties to them, while engaged in 
their performance and before any controversy has 
arisen concerning them, is one of the best  
indication of their true intent.” 
[People v  
Michigan Central R Co, 145 Mich 140, 166; 108 NW 
772 (1906) (citation omitted) (portion of dissent 
by GRANT, J., assented to by the majority at 150).]  
Because the language of the contract here is ambiguous, and  
because defendant had, in the past, construed this contract to  
require the payment of retirement renewal commissions  
23  
according to the vesting schedule, even if the agent was not  
at least sixty-five years old and had not served as an agent  
with defendant for at least ten years, the trial court did not  
err in instructing the jury to consider this evidence.  
Although the trial court correctly instructed the jury  
that it could consider relevant extrinsic evidence and that  
any ambiguities should be construed against the drafter  
pursuant to the rule of contra proferentem, the trial court  
failed to inform the jury that it could only apply the rule of  
contra proferentem if it was unable to discern the parties’  
intent from the extrinsic evidence.  However, in this case,  
this error was harmless.  The jury did one of two things here.  
The jury either construed the language of the contract in  
favor of plaintiff pursuant to the rule of contra proferentem,  
or it construed the language of the contract in favor of  
plaintiff because the extrinsic evidence pointed to a  
construction 
of 
the 
contract 
in 
plaintiff’s 
favor.20  
Accordingly, regardless of which approach the jury used, it  
reached the (same) right result and, thus, failure to reverse  
is not inconsistent with substantial justice. MCR 2.613(A);  
Cox v Flint Bd of Hospital Managers, 467 Mich 1, 8; 651 NW2d  
20 All the extrinsic evidence presented at trial favors 
plaintiff’s construction of the contract. Defendant did not  
present any extrinsic evidence at trial that favors its 
construction.  
24  
 
 
356 (2002).21  
IV. CONCLUSION  
If two provisions of the same contract irreconcilably  
conflict with each other, the language of the contract is  
ambiguous.
 In this case, the contract’s definition of  
retirement irreconcilably conflicts with the contract’s  
vesting schedule. 
Under the contract’s definition of  
retirement, plaintiff is not entitled to renewal commissions;  
while, under the vesting schedule, plaintiff is entitled to  
renewal commissions.  Accordingly, the contract language at  
issue here is ambiguous.  
The interpretation of a contract whose language is  
ambiguous is a question of fact for the jury to decide.  When  
interpreting a contract whose language is ambiguous, the jury  
is to consider relevant extrinsic evidence. That the drafting  
party interpreted the ambiguous contractual language in a  
certain way for many years is relevant extrinsic evidence.  
In interpreting a contract whose language is ambiguous  
and in which the parties’ intent cannot otherwise be  
determined through resort to relevant extrinsic evidence, the  
jury should construe any ambiguities against the drafter of  
21 “Instructional error warrants reversal if the error  
‘resulted in such unfair prejudice to the complaining party 
that the failure to vacate the jury verdict would be 
“inconsistent with substantial justice.”’”  Cox, supra at 8  
(citations omitted).  
25  
the contract.  That is, if, after the jury has considered all  
conventional 
means 
of 
contract 
interpretation 
and 
all 
relevant  
extrinsic evidence,  it is still unable to determine what the  
parties intended, the jury should then construe the ambiguity  
against the drafter.  
Therefore, we conclude that the trial court here did not  
err in instructing the jury that it should consider relevant  
extrinsic evidence in order to discern the parties’ intent,  
and that it should also construe any ambiguities against the  
drafter.
 Although the trial court did err in failing to  
inform the jury that it should only construe ambiguities  
against the drafter if it cannot discern the parties’ intent  
from 
the 
relevant 
extrinsic evidence, this error was harmless.  
Accordingly, we reverse the judgment of the Court of Appeals  
and remand this case to the Court of Appeals for consideration  
of defendant’s other appellate issue and plaintiff’s cross­
appeal.  
Stephen J. Markman 
Maura D. Corrigan 
Clifford W. Taylor 
Robert P. Young, Jr.  
CAVANAGH, J.  
I concur in the result only.  
Michael F. Cavanagh  
26  
 
 
 
________________________________ 
S T A T E 
O F 
M I C H I G A N  
SUPREME COURT  
CRAIG A. KLAPP,  
Plaintiff-Appellant,  
v 
Nos. 119175, 119176  
UNITED INSURANCE GROUP AGENCY, 
INC.,  
Defendant-Appellee.  
WEAVER, J. (concurring).  
I concur in the decision to reverse the judgment of the  
Court of Appeals and remand the case to that Court for  
consideration of issues raised, but not addressed, below.  I  
write separately because I disagree with the majority’s  
holding that “the rule of contra proferentem is only to be  
applied if the intent of the parties cannot be discerned  
through the use of all conventional rules of interpretation,  
including an examination of relevant extrinsic evidence.”  
Ante at 18. Although I agree that this is the general rule,  
I would hold that when a contract is drafted entirely by one  
party, without any bilateral negotiations, the rule that a  
contract is to be strictly construed against its drafter  
1  
should be applied as the primary rule of construction, not as  
a last resort, and extrinsic evidence is not admissible to  
clarify ambiguity in the contract.  
The doctrine of contra proferentem, under which a  
contract that is ambiguous will be construed against the party  
preparing it, is a well-established rule.  See, e.g.,  
Universal Underwriters Ins Co v Kneeland, 464 Mich 491, 498;  
628 NW2d 491 (2001) (discussing the “rule requiring that  
contractual ambiguities be construed against the drafter”);  
Herweyer v Clark Hwy Services, Inc, 455 Mich 14, 22; 564 NW2d  
857 (1997)(“As the contract period under consideration is  
ambiguous, it must be construed against the drafter.”).  In  
general, it is a rule of last resort, to be applied only if  
the intent of the parties cannot be discerned by the use of  
other rules of interpretation.  See 2 Farnsworth, Contracts  
(2nd ed), ch 7 §7.11, and 5 Corbin, Contracts (rev ed, 1998),  
§ 24.27, pp 297-300.  
The questions we asked the parties to address1 are  
1In granting leave to appeal, this Court directed the 
parties to include among the issues to be briefed:  
Where, as in the present case, a contract is 
drafted 
entirely 
by 
one 
party, 
without 
any 
bilateral negotiations, is extrinsic evidence  
admissible to clarify ambiguity in the contract or 
is any ambiguity in the contract simply to be 
construed against the drafter (without considering 
any extrinsic evidence)? [467 Mich 687 (2002).]  
2  
 
 
 
whether 
extrinsic 
evidence should be precluded and whether the  
rule of construing against the drafter should be applied  
initially, instead of as a rule of last resort, when the  
contract is drafted entirely by one party without bilateral  
negotiation.  I conclude that in such a case, the rule of  
contra proferentem should be applied as the primary rule of  
construction, not as a last resort, and that extrinsic  
evidence is not admissible to clarify the ambiguity.  
The ultimate objective in interpreting an ambiguous  
contract is to ascertain the intent of the parties so the  
agreement can be carried out according to that intent.  Loyal  
Order of Moose, Adrian 1034 v Faulhaber, 327 Mich 244, 250; 41  
NW2d 535 (1950); Stine v Continental Casualty Co, 419 Mich 89,  
112; 349 NW2d 127 (1984). 
When there are bilateral  
negotiations between the parties, a court can assume that  
there is a relation between the contract terms that were  
agreed upon and the parties’ expectations as revealed by  
extrinsic evidence. However, “unless extrinsic evidence can  
speak to the intent of all parties to a contract, it provides  
an incomplete guide with which to interpret contractual  
language.” SI Mgt LP v Wininger, 707 A2d 37, 43 (Del, 1998)  
(emphasis in original).  
The Supreme Court of Delaware has held that where  
ambiguity arises in a contract drafted solely by one side and  
3  
offered to others on a take-it-or-leave-it basis, the rule of  
construing against the drafter is determinative.  SI Mgt,  
supra; followed by Intel Corp v Via Technologies, Inc, 174 F  
Supp 2d 1038 (ND Cal, 2001).  In SI Mgt the Delaware court  
analyzed its approach to interpreting insurance contracts.  
The Delaware courts had said that if an insurance contract is  
ambiguous, 
“‘the 
principle 
of 
contra 
proferentem 
dictates 
that  
the contract must be construed against the drafter.’”  SI  
Management, supra at 42 (citation omitted). The court found  
that the policy behind that principle of construing against  
the drafter is that the insurer was in complete control of  
creating and drafting the policy, while the insured had little  
say about those terms except to take them or leave them or to  
select from limited terms offered by the insurer.  Because of  
that, the Delaware courts had consistently held that the  
insurer had an obligation to make the terms clear and should  
suffer the consequences of convoluted or confusing terms.  In  
SI Mgt the Delaware Supreme Court expanded this principle to  
other contracts where there was not a bilaterally negotiated  
agreement, and one party had signed onto an agreement that it  
had no hand in drafting.  
There are sound public-policy reasons behind a black  
letter rule that when contractual provision are drafted  
entirely by one party, any ambiguity in the contract is to be  
4  
construed against the drafter.  First, the rule of contra  
proferentem provides a strong incentive for a party drafting  
a contract to use clear and unambiguous language.  Second, the  
use 
of 
extrinsic 
evidence 
in 
circumstances 
involving 
ambiguity  
could be destabilizing to contractual relations and require  
more 
involved 
litigation by allowing parties to use assertions  
of oral understandings and examples of past behavior rather  
than relying on a written contract with the understanding that  
any ambiguity should be construed against its drafter.  
This Court has not previously addressed whether the rule  
of construing against the drafter should be used as a primary  
rule of construction in ambiguous contracts or only used after  
considering any extrinsic evidence available.2
 However, in  
interpreting ambiguous contracts, this Court has consistently  
applied the rule of construing against the drafter as its  
primary, indeed sole, aid to construction.  See Herweyer v  
Clark Hwy Services, 455 Mich 14, 22; 564 NW2d 857 (1997) (“As  
the contract period under consideration is ambiguous, it must  
2The majority asserts that none of the cases I cite 
“concludes that the rule of contra proferentem is somehow a 
‘primary rule of construction.’” Ante at 20. It is noteworthy 
that similarly none of the Michigan cases cited by the 
majority state that the rule of contra proferentem is a rule 
of last resort.  It is precisely because this Court had not 
previously addressed the question whether the rule of contra 
proferentem should be applied without first examining any 
relevant extrinsic evidence that our order granting leave to 
appeal in this case asked the parties to discuss it in their 
briefs.  
5  
 
be 
construed 
against 
the 
drafter, 
the 
defendant.”),  
Lichnovsky v Ziebart Int’l Corp, 414 Mich 228, 239; 324 NW2d  
732 (1982) (“Any ambiguity in the expression must be construed  
against Ziebart, as its predecessor drafted the agreement.”),  
Ladd v Teichman, 359 Mich 587, 592; 103 NW2d 338 (1960) (“We  
agree with appellees that appellant having drafted the  
contract, any ambiguity contained in it must be construed  
against him.”), and Veenstra v Associated Broadcasting Corp,  
321 Mich 679, 691; 33 NW2d 115 (1948) (“Defendants caused the  
drafting of the two contracts and any doubt or ambiguity  
concerning the nature of the contracts must be resolved  
against the defendants.”).  
Similarly, this Court has consistently applied the rule  
of construing against the drafter as the primary tool of  
construction in insurance contracts.  In insurance contracts,  
one party decides the terms of the contract, drafts the  
contract, and presents it to the other party in a take-it-or­
leave-it fashion, all with no bilateral negotiation. Michigan  
Millers Mut Ins Co v Bronson Plating Co, 445 Mich 558, 567;  
519 NW2d 864 (1994) (in interpreting insurance cases, a well­
established principle of construction is, “Where ambiguity is  
found, the court must construe the term in the manner most  
favorable to the insured.”).  See also State Farm Mut  
Automobile Ins Co v Enterprise Leasing Co, 452 Mich 25, 38;  
6  
549 NW2d 345 (1996) (“[b]ecause State Farm prepared the form  
insurance contracts, any ambiguity must be strictly construed  
against it.”),  Raska v Farm Bureau Mut Ins Co of Michigan,  
412 Mich 355, 362; 314 NW2d 440(1982) (“If a fair reading of  
the entire contract of insurance leads one to understand that  
there is coverage under particular circumstances and another  
fair reading of it leads one to understand that there is no  
coverage under the same circumstances the contract is  
ambiguous and should be construed against its drafter and in  
favor of coverage.”), and Bonney v Citizens’ Mut Automobile  
Ins Co, 333 Mich 435, 438; 53 NW2d 321 (1952) (“An ambiguous  
contract must be construed against the party who prepared  
it.”). 
3  
I would hold that this principle should be extended  
beyond insurance contracts and applied to other contracts in  
which there is a similar disparity of control in the creation  
of the terms of the contract. Here defendant was the entity  
3The majority says that in all the cases cited above “the 
rule of contra proferentem was, in all likelihood, applied 
because there was no way to determine the parties’ intent. 
That is, the language of the contract was ambiguous, but there 
was no relevant extrinic evidence available.” Ante at 21. The  
majority’s assertion is not supported by the opinions 
themselves. None of the opinions cited states that relevant 
extrinsic evidence was not available, nor that there was no 
other way by which to determine the parties’ intent.  Instead, 
the opinions consistently apply the well-established rule of 
construing against the drafter as the first—indeed the  
only—tool of construction in resolving ambiguous contracts.  
7  
in sole control of the process of creating and setting forth  
the terms of the contract.  The parties did not engage in  
bilateral negotiation; the plaintiff’s only choice in the  
terms of the contract was to take them or leave them.  In such  
a situation, any ambiguity in the contract should have been  
construed against the drafter, without considering the  
extrinsic evidence.  
In this case, the trial judge allowed the plaintiff to  
introduce 
a 
variety 
of 
extrinsic 
evidence, 
including  
references to the older version of the Agent's Agreement4 and  
deposition testimony by the defendant's executives.5  I would  
hold that the trial court erred in admitting the extrinsic  
evidence to resolve the contract’s ambiguity. However, that  
error was harmless, because the same result was achieved as  
would have been if the contract had been construed against its  
drafter, defendant.  
4The plaintiff was attempting to show that the language 
“[v]estment [sic] for retirement is age 65 or 10 years of 
service whichever is later” in the Agent’s Manual was 
unintentionally left in the Agent’s Manual, and was no longer 
relevant given the new Agent’s Agreement.  
5This testimony showed that the defendant's past practice  
had been to pay former agents the renewal commissions  
specified by the § 5(B) vesting schedule, even when those 
agents did not have ten years of service with the defendant or 
had not reached age sixty-five.  
8  
Accordingly, I concur with the decision to reverse the  
judgment of the Court of Appeals and remand the case to that  
Court for consideration of those issues raised, but not  
addressed below.  
Elizabeth A. Weaver  
Marilyn Kelly  
9