Sometimes a Contract is Ambiguous, and Sometimes it is Not

By: Jeffrey M. Haber

Contracts are intended to bring certainty and clarity to commercial relationships, yet disputes often arise when written terms leave room for more than one reasonable interpretation. Under New York law, the question of ambiguity can determine whether a case is resolved on the face of the agreement or proceeds into litigation over extrinsic evidence and party intent. What one party views as a carefully drafted provision may, in hindsight, become the battleground for competing interpretations of the same words.

New York courts take a text‑first approach to contracts, enforcing unambiguous language as written and declining to rewrite agreements under the guise of interpretation. But when contractual language is susceptible to multiple reasonable interpretations, the analysis shifts. Courts must decide whether ambiguity exists as a matter of law, and if so, whether outside evidence may be considered to determine the parties’ intent.

In today’s article, we examine how New York courts apply these principles through two contrasting cases – one in which the court found contractual language to be ambiguous and permitted consideration of extrinsic evidence (Derkovitz v. Up State Tower Co., LLC, 2026 N.Y. Slip Op. 02562 (4th Dept. Apr. 24, 2026), and a second in which the court rejected claims of ambiguity and enforced the agreement as written (Cass v. Newell, 2026 N.Y. Slip Op. 02542 (4th Dept. Apr. 24, 2026). Together, these decisions illustrate how distinctions in wording, structure, and context can determine whether a dispute is resolved at the pleading stage or proceeds into discovery, underscoring why careful drafting remains the strongest defense against unintended interpretations.

A Primer on Contract Interpretation

“The elements of a cause of action for breach of contract are the existence of a contract, the plaintiff’s performance under the contract, the defendant's breach of that contract, and resulting damages.”[1] 

“It is well settled that ‘[t]he fundamental, neutral precept of contract interpretation is that agreements are construed in accord with the parties' intent.’”[2]  Because the “best evidence of what the parties intend is what they say in their writing, . . . a written agreement that is complete, clear and unambiguous on its face must be enforced according to the plain meaning of its terms.”[3] 

A contract is unambiguous if the language it uses has “a definite and precise meaning, unattended by danger of misconception in the purport of the [agreement] itself, and concerning which there is no reasonable basis for a difference of opinion.”[4] “Thus, if the agreement on its face is reasonably susceptible of only one meaning, a court is not free to alter the contract to reflect its personal notions of fairness and equity.”[5]

The moving party has the burden of establishing that the contract is ambiguous, i.e., that “its construction of the [contract] is the only construction [that] can fairly be placed thereon.”[6] 

Derkovitz v. Up State Tower Co., LLC

Plaintiffs entered into a lease agreement (“lease”) with defendant to permit defendant to place a cell tower (“Communications Facility”) on a designated portion of plaintiffs’ property (“Premises”). As relevant to the action, the lease provided that plaintiffs would pay “all real estate taxes and assessments on the Property on time” and that defendant would pay “all personal property taxes on the Communications Facility on time.” The lease defined “Property” by the metes and bounds of the real property owned by plaintiffs, while “Communications Facility” is defined as “a pole or tower, and . . . related equipment, cables, antennas, equipment shelters or cabinets and fencing and any other items [defendant] need[s] to successfully and securely use the Premises.” The lease provided that title to the Communications Facility would remain “personal to and be vested in [defendant]” and was described in the lease as defendant’s “personal property.” However, neither “real estate taxes and assessments” nor “personal property taxes” is defined in the lease. New York State does not impose personal property taxes.

The central dispute in Derkovitz was whether, in agreeing to “pay all personal property taxes on the Communications Facility,” defendant agreed to pay the additional tax attributable to the Communications Facility or whether, in agreeing to pay “all real estate taxes and assessments on the Property,” plaintiffs agreed to pay that additional tax.

The motion court denied plaintiffs’ motion for summary judgment on the complaint and granted defendant’s cross-motion for, inter alia, summary judgment dismissing the complaint. Plaintiffs appealed. The Appellate Division, Fourth Department, modified the order on the law by denying the cross-motion and reinstated the complaint.

The Court held “that the lease provisions regarding the parties’ respective tax obligations [were] ambiguous as to which party [was] responsible for paying the additional tax attributable to the Communications Facility.”[7] The Court rejected defendant’s argument “that the only reasonable interpretation of the lease [was] that it impose[d] upon plaintiffs the responsibility for paying the additional tax related to the Communications Facility inasmuch as the plain language require[d] plaintiffs to pay real estate taxes and assessments, that defendant [was] obligated to pay only personal property taxes, and that there are no personal property taxes imposed in New York State.”[8] The Court concluded that plaintiffs “effectively contend[ed] that the only reasonable interpretation of the provision requiring defendant to pay personal property taxes [was] that defendant agreed to pay the additional tax attributable to the Communications Facility and that any other interpretation would render that requirement ‘meaningless or without force or effect.’”[9]

Cass v. Newell

Plaintiff commenced the action alleging, inter alia, the breach of an option agreement between him and one of the defendants (“defendant”). Defendants moved pursuant to CPLR 3211 (a) (1), (5), and (7) to dismiss the complaint and pursuant to CPLR 3212 for summary judgment dismissing the complaint. The motion court denied the motion to the extent that it sought dismissal of the first, second, and fourth causes of action. Defendants appealed from the order to the extent that it denied their motion. The Appellate Division, Fourth Department, reversed.

Plaintiff and defendant each held a 50% interest in defendants, Chautauqua Lakeview, LLC and Lakeview Hotel, LLC (collectively, “LLCs”), which owned and operated a hotel. In January 2015, plaintiff assigned his interests in the LLCs to defendant. In February 2015, plaintiff and defendant entered into an option agreement. Pursuant to the agreement, plaintiff had “the exclusive right and option to purchase the” 50% interests in the LLCs that he had transferred to defendant. The agreement provided that the “option shall expire at midnight on December 31, 2020, or so long as [defendant] shall continue to own 100% of the interests in” the LLCs. The agreement further provided that, at the termination of the option, plaintiff “shall have the right to extend the option period for an additional period of five . . . years.” In November 2023, plaintiff notified defendant of his intent to exercise the option, and defendant responded through his counsel that the agreement was not enforceable.

The Court “agree[d] with defendants that the fourth cause of action, alleging breach of contract, as well as the first and second causes of action, which the parties agree[d] depend[ed] on the breach of contract cause of action, must be dismissed pursuant to CPLR 3211 (a) (1).”[10]

The Court found that the “the option agreement [was] not ambiguous,” and that defendants “did not breach it.”[11] The Court explained that plaintiff’s attempt to extend the agreement was untimely: “When plaintiff attempted to exercise the option in November 2023, it had already expired inasmuch as the December 31, 2020 deadline had passed, plaintiff never exercised his right to extend the option period, and defendant no longer owned 100% of the interests in the LLCs.”[12]  The Court noted that since “plaintiff never sought to exercise the option before it expired at the end of 2020, it [was] immaterial that defendant had already transferred the assets of the LLCs and dissolved the LLCs prior to that time,” which “the option agreement did not prohibit defendant from” doing.[13] In fact, said the Court, “selling his interests in the LLCs …[was] specifically contemplated” by the agreement “inasmuch as it provided that the option would expire at the end of 2020 ‘or so long as’ defendant continued to own 100% of the interests in the LLCs.”[14]

The Court “reject[ed] plaintiff’s contention—raised as an alternative ground for affirmance—that the option agreement was ambiguous and may be interpreted as giving him, in addition to the option, the ‘exclusive right’ to purchase back his interests in the LLCs, i.e., that he was the only person who could buy those interests.”[15] The Court explained that “[p]laintiff’s interpretation ‘rest[ed] on an impermissibly strain[ed reading] to find an ambiguity which otherwise might not be thought to exist.’”[16] Notably, the Court found that “under plaintiff’s interpretation [of the agreement], the option term and extension of term provisions would be meaningless.”[17] In fact, said the Court, “under plaintiff’s interpretation, the option agreement never expires, which would be absurd and commercially unreasonable.”[18] 

Takeaway

Derkovitz and Cass reinforce the principle that contract ambiguity is not triggered by disagreement between the parties, but by the language of the agreement itself. Courts begin, and often end, with the text of the agreement. Where contract provisions, read in context, are reasonably susceptible to more than one interpretation, ambiguity exists, and extrinsic evidence may be considered to ascertain the parties’ intent. But where the language has a definite and precise meaning, courts will enforce the contract as written, even if one party later comes to regret the bargain it struck.

The contrast between Derkovitz and Cass illustrates how even seemingly careful drafting can nevertheless result in disputes over the meaning of a contract. In Derkovitz, the lease attempted to allocate tax responsibility by distinguishing between “real estate taxes” and “personal property taxes,” yet failed to define either term, and did so in an environment where one category of tax did not exist. That disconnect created a genuine interpretive problem, making summary resolution inappropriate and opening the door to extrinsic evidence. Derkovitz underscores that an undefined term can introduce ambiguity even when the overall structure of the contract appears clear and unambiguous.

By contrast, Cass demonstrates that not every disagreement over meaning gives rise to ambiguity. In Cass, plaintiff sought to convert an option agreement with clear temporal limits into an open‑ended exclusive purchase right. The Court rejected that effort, emphasizing that courts will not strain contractual language to create ambiguity, particularly where doing so would render other provisions meaningless or lead to commercially unreasonable results.

Taken together, Derkovitz and Cass highlight two practical lessons. First, precision in drafting matters – the contract should say what the parties mean and mean what it says. Second, New York’s text‑first approach is both a sword and a shield: it protects parties from after‑the‑fact reinterpretation, but only if the drafting leaves no reasonable room for doubt. Careful attention to definitions, internal consistency, and real‑world application remains the most reliable way to ensure that a contract means what the parties intend.

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Jeffrey M. Haber is a partner and co-founder of Freiberger Haber LLP.

This article is for informational purposes only and is not intended to be, and should not be, taken as legal advice.

Unless otherwise stated, Freiberger Haber LLP’s articles are based on recently decided published opinions and not on matters handled by the firm.

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[1] Pearl St. Parking Assoc. LLC v. County of Erie, 207 A.D.3d 1029, 1031 (4th Dept. 2022) (internal quotation marks omitted).

[2] Colella v. Colella, 129 A.D.3d 1650, 1651 (4th Dept. 2015), quoting Greenfield v. Philles Records, 98 N.Y.2d 562, 569 (2002).

[3] Greenfield, 98 N.Y.2d at 569; see also MHR Capital Partners LP v. Presstek, Inc., 12 N.Y.3d 640, 645 (2009) (internal quotation marks omitted); Brad H. v. City of New York, 17 N.Y.3d 180, 185 (2011); W.W.W. Assoc. v. Giancontieri, 77 N.Y.2d 157, 162-163 (1990).

[4] Breed v. Insurance Co. of N. Am., 46 N.Y.2d 351, 355 (1978), rearg. Denied, 46 N.Y.2d 940 (1979); see Selective Ins. Co. of Am. v. County of Rensselaer, 26 N.Y.3d 649, 655 (2016).

[5] Greenfield v. Philles Records, 98 N.Y.2d 562, 569-570 (2002); see Selective Ins. Co. of Am., 26 N.Y.3d at 655.

[6] Kowalak v. Keystone Med. Servs. of N.Y., P.C., 197 A.D.3d 893, 894 (4th Dept. 2021) (internal quotation marks omitted).

[7] Derkovitz, Slip Op. at *1.

[8] Id.

[9] Id., citing Nomura Home Equity Loan, Inc., Series 2006-FM2 v. Nomura Credit & Capital, Inc., 30 N.Y.3d 572, 581 (2017).

[10] Cass, Slip Op. at *1.

[11] Id.

[12] Id., citing Olden Group, LLC v. 2890 Review Equity, LLC, 209 A.D.3d 748, 751-752 (2d Dept. 2022).

[13] Id.

[14] Id.

[15] Id.

[16] Id., quoting Uribe v. Merchants Bank of N.Y., 91 N.Y.2d 336, 341 (1998) (internal quotation marks omitted), and citing Albert Frassetto Enters. V. Hartford Fire Ins. Co., 144 A.D.3d 1556, 1558 (4th Dept. 2016).

[17] Id., citing Two Guys from Harrison-N.Y. v. S.F.R. Realty Assoc., 63 N.Y.2d 396, 403 (1984).

[18] Id., citing NCCMI, Inc. v. Bersin Props., LLC, 226 A.D.3d 88, 96 (1st Dept. 2024); Matter of El-Roh Realty Corp., 74 A.D.3d 1796, 1800 (4th Dept. 2010).