Opinion ID: 36872
Heading Depth: 4
Heading Rank: 2

Heading: The Sole Discretion Clause is Susceptible to Two Different but Reasonable Interpretations

Text: 51 Texas law on contract construction and the admission of parol evidence is well-settled: 52 The primary concern of a court in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument. If a written contract is so worded that it can be given a definite or certain legal meaning, then it is not ambiguous. Parol evidence is not admissible for the purpose of creating an ambiguity. 53 If, however, the language of a policy or contract is subject to two or more reasonable interpretations, it is ambiguous. Whether a contract is ambiguous is a question of law for the court to decide by looking at the contract as a whole in light of the circumstances present when the contract was entered. Only where a contract is first determined to be ambiguous may the courts consider the parties' interpretation, and admit extraneous evidence to determine the true meaning of the instrument. 54 An ambiguity in a contract may be said to be patent or latent. A patent ambiguity is evident on the face of the contract. A latent ambiguity arises when a contract which is unambiguous on its face is applied to the subject matter with which it deals and an ambiguity appears by reason of some collateral matter. 23 55 Applying these principles to the Separation Agreement and the facts of this case, Rodriguez makes a compelling argument that the Sole Discretion clause contains a latent ambiguity. 24 It is anything but pellucid whether the or has created language in the clause — which permits Dell to terminate Rodriguez if he is creating, or has created, a negative impact on Dell or on Dell's reputation in the Spanish market — is only prospective or is both retrospective and prospective. It is susceptible of either reading, both of which are reasonable. As this is the very definition of ambiguity, the district court's grant of summary judgment in Dell's favor on this point was reversible error. Rodriguez should have been allowed to submit parol evidence to the jury in an effort to convince it that his interpretation of this ambiguous clause of the contract was correct. 25 We therefore reverse the district court's ruling that the Sole Discretion clause was unambiguous and remand for further proceedings on this issue.