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Contracts Need Not Be Fair To Both Parties As Long As The Terms Are Clear

On Behalf of | Jan 23, 2014 | Business Transactions

Under New Hampshire law, parties are generally left to the deal they agree to, not what they, on second thought, believe they should had agreed to. When interpreting a written contract, the “inquiry focuses on the intent of the contracting parties at the time of the agreement.” R. Zoppo Co. v. City of Dover, 124 N.H. 666, 671 (1984).

In the absence of ambiguity, the parties’ intent will be determined from the plain meaning of the language used. The words and phrases used by the parties will be assigned their common meaning, and we will ascertain the intended purposes based upon the meaning that would be given to it by a reasonable person.

Greenhalgh v. Presstek, 152 N.H. 695, 698 (2005).   A court will not re-write a contract to add language that was not included by the parties. See Centorr-Vacuum Indus. v. Lavoie, 135 N.H. 651, 654 (1992).   Similarly, a court will not re-write a contract so that one party can avoid the consequences of a bad deal. Olbres v. Hampton Co-op. Bank, 142 N.H. 227, 233 (1997); see also Northern Heel Corp. v. Comp Industries, Inc., 851 F.2d 456, 466 (1st Cir. 1988) (“we decline to rewrite the agreement between the parties to include a representation which they were mutually content to let slide in the course of their negotiations”).

The issue of whether contract language is ambiguous presents a question of law.   Behrens v. S.P. Construction Co., Inc., 153 N.H. 498, 503 (2006). An ambiguity only exists if the parties could reasonably differ as to the meaning of the language. Appeal of Town of Durham, 149 N.H. 486, 487 (2003). “However, an ambiguity is not created simply because a controversy exists between the parties, each favoring an interpretation contrary to the other.” In re: Newfound Lake Marina, Inc., 352 B.R. 721, 725-6 (Bankr. D.N.H. 2006) (discussing Massachusetts law).

There is an implied covenant of good faith and fair dealing in agreements that prevent one party from playing games with contract terms, such as trying to get out of a contractual obligation by making sure a condition of performance becomes impossible, yet the New Hampshire Supreme Court has repeatedly held that the implied covenant of good faith and fair dealing cannot be invoked to alter or expand the express terms of an agreement. See Arhendt v. Granite Bank, 144 N.H. 308, 313 (1999) (where depositor agreement allowed the plaintiff unfettered access to her funds, she was not allowed to use the implied covenant of good faith to impose an extra-contractual obligation upon the bank to investigate the motives or wisdom of her withdrawals); Olbres, 142 N.H. at 233 (implied covenant of good faith must be consistent with the principles that parties are generally bound by the terms of an Agreement freely and openly entered into and cannot rewrite contracts); Great Lakes Aircraft Co. v. City of Claremont, 135 N.H. 270, 284 (1992) (“implied covenants are qualified and restrained by any express covenants of a more limited character”).

In conclusion, courts do not in general allow one party to change an agreement, without the consent of the other party, into what he or she decides would be fair.

J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].