An Ambiguous Contract in California: How a Court Decides What the Words Mean

Last updated: November 2026. Reviewed by Pavel Kolmogorov, California business litigation attorney (State Bar No. 321018).

A contract is ambiguous when its words can reasonably be read more than one way. A California court resolves the doubt by looking for the mutual intention of the parties as it existed at the time of contracting. (Civ. Code, § 1636.) Clear language controls. Otherwise the court turns to the whole contract, the circumstances, trade usage, and the parties' conduct. Only if doubt remains is the language read against the party who caused it. Kolmogorov Law, P.C. litigates contract ambiguity disputes for businesses.

Call (909) 235-6116 or contact us online to discuss a contract clause that you and the other side read differently.

The goal: mutual intention at the time of signing

The target is the shared intention at the time of contracting, so far as it can be ascertained and is lawful. (Civ. Code, § 1636.)

When the contract is in writing, that intention is to be found from the writing alone, if possible. (Civ. Code, § 1639.) The language governs if it is clear and explicit and does not involve an absurdity. (Civ. Code, § 1638.)

Is the clause ambiguous at all?

One side says the words are plain. The other says they can be read two ways.

California does not let a judge settle the point by looking at the page alone. The test for admitting outside evidence to explain a written contract is not whether the writing appears plain and unambiguous on its face. It is whether the offered evidence is relevant to prove a meaning to which the language is reasonably susceptible. (Pacific Gas & Electric Co. v. G. W. Thomas Drayage & Rigging Co. (1968) 69 Cal.2d 33, 37.)

In practice the court takes a preliminary look at the evidence of what the parties meant. If the language then proves fairly susceptible to either reading, the evidence comes in to show which one was intended. (Id. at pp. 39-40.) What outside evidence of an earlier agreement may not do is contradict a final written term, a limit explained on our page about the parol evidence rule.

The Civil Code's rules of interpretation

The Code supplies a set of rules. Several apply directly to commercial contracts.

Read the whole contract together, so as to give effect to every part if reasonably practicable, each clause helping to interpret the other. (Civ. Code, § 1641.)
Give words their ordinary and popular sense, not their strict legal meaning, unless the parties used them in a technical sense or usage gives them a special meaning. (Civ. Code, § 1644.)
Explain the contract by the circumstances under which it was made and the matter to which it relates. (Civ. Code, § 1647.)
Prefer the interpretation that makes the contract lawful, operative, definite, reasonable, and capable of being carried out, if that does no violence to the parties' intention. (Civ. Code, § 1643.)
Where a form was filled in or altered for this deal, the written or specially prepared parts control the printed form. (Civ. Code, § 1651.)

One rule speaks directly to a clause that is uncertain. An ambiguous promise must be interpreted in the sense in which the promisor believed, when making it, that the promisee understood it. (Civ. Code, § 1649.)

A court applying these rules is not editing. The judge's office is to declare what the instrument contains, not to insert what has been omitted or to omit what has been inserted. (Code Civ. Proc., § 1858.)

What the parties did: performance, dealing, and usage

Conduct before the dispute can be strong evidence of meaning. Terms in a final writing may be explained or supplemented by course of dealing, usage of trade, or course of performance. (Code Civ. Proc., § 1856, subd. (c).)

For sales of goods the Commercial Code ranks these sources when they cannot be reconciled. Express terms prevail over course of performance, course of dealing, and usage of trade. Course of performance prevails over the other two. Course of dealing prevails over usage of trade. (Com. Code, § 1303, subd. (e).) Separately, a course of performance can show that a term was waived or modified. (Com. Code, § 1303, subd. (f).) The existence and scope of a usage of trade must be proved as facts. (Com. Code, § 1303, subd. (c).)

Construction against the drafter comes last

This rule is the tiebreaker, not the starting point. In cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist. (Civ. Code, § 1654.)

Two points follow from the wording. The rule applies only after the other rules have failed to resolve the doubt. And it runs against the party who caused the uncertainty, which may be the drafter and may be disputed when both sides traded redlines. Where the contract is a patchwork of purchase orders and acknowledgments, which document controls is a separate question covered on our page about the battle of the forms.

Judge or jury

The California Supreme Court has said interpretation of a written instrument is solely a judicial function when it rests on the words alone or when the outside evidence is not in conflict. When the parties' intent turns on the credibility of conflicting outside evidence, the question may go to the jury. (City of Hope National Medical Center v. Genentech, Inc. (2008) 43 Cal.4th 375.)

A party relying on the text alone can ask the judge to decide the issue, including on a motion for summary judgment. A party relying on negotiations and conduct needs a real conflict in the evidence to reach a jury.

Building the case for your reading

Collect the drafts and redlines. They show who proposed the disputed words and what was struck. Gather the emails in which the term was discussed, and the invoices, reports, or shipments that show how both sides performed before anyone objected. We read the whole contract before the clause, because another section may answer the question.

Two related problems need a different remedy. If the writing is not unclear but wrong, the claim may be reformation, covered on our page about mistake in a contract. If the dispute concerns future performance, a court can sometimes resolve it before a breach through declaratory relief.

What to bring to the first meeting

The signed contract with all exhibits, amendments, and related agreements from the same deal.
Every draft and redline, with the emails that carried them.
Correspondence in which either side described the disputed term.
Records of performance under the clause before the dispute began.

Frequently asked questions

Our contract can be read two ways and each side insists on its own reading. How does a California court decide what it means?

It applies the Civil Code's rules of interpretation to find the parties' mutual intention at signing. The court starts with the words, reads the contract as a whole, and considers the circumstances, trade usage, and how the parties performed. If the clause is reasonably open to both readings, evidence of negotiations is admissible to show which was intended.

What makes a contract ambiguous?

A term is ambiguous when it is reasonably susceptible to more than one meaning. In California a court does not decide that from the face of the document alone. It first considers the evidence offered to show what the parties meant, then asks whether the language can reasonably bear the proposed reading.

Who wins when a contract is ambiguous?

Neither side wins automatically. A California court works through the statutory rules: the whole contract, ordinary meaning, circumstances, usage, and the understanding the promisor knew the other party had. Only when those rules leave the doubt unresolved is the term read against whoever caused the uncertainty.

What is contra proferentem in California?

It is the rule of construction against the drafter, found in Civil Code section 1654. In cases of uncertainty not removed by the other rules of interpretation, the language is interpreted most strongly against the party who caused the uncertainty. California treats it as a last step, not a starting presumption.

The other side wrote the contract and now says an unclear clause means what they want. Is it read against them?

Possibly, but not first. California courts try to resolve the meaning through the text, the contract as a whole, the negotiations, and both parties' conduct. If real uncertainty remains after that, Civil Code section 1654 directs that the language be read against the party who caused it, which may be the drafter.

Talk to a California breach of contract attorney

If a contract dispute turns on what a clause means, call (909) 235-6116 or contact us online. Kolmogorov Law, P.C. is a business litigation firm in Irvine, California, that represents companies and their owners in court and in arbitration.

This page provides general information about California law and is not legal advice. Outcomes depend on the contract language, the evidence of intent, and the court.