A basic truth about contracts is that once the contracting parties have come to a meeting of their minds regarding the terms of their contract, absent some overriding law, such as one that makes the contract illegal, or some other reason why an unambiguous contract should not be enforced literally as written, the courts will not substitute their own business judgment for that of the contracting parties, or rewrite its language. But are there circumstances where the literal meaning of the words used does not reflect the actual intent of the contracting parties, and the court should interpret those words to mean something other than exactly what is stated in the contract?
The use of hyperbole in communication is commonplace. When you are “so hungry you can eat horse,” nobody really expects you to dine on horsemeat at your next meal. When the person you are waiting to see is running late, are you really expected to “wait an eternity” to see them. But what about if in a commercial lease there is a “co-tenancy” provision, pursuant to which a tenant is given the right to terminate its lease “at any time” after a specified co-tenant ceases it operations? Does the use of the words “at any time” really mean that the tenant can wait five years, ten years, or even longer after its co-tenant has stopped operating before exercising that contractual right?
Even though the words “at any time” are arguably not ambiguous on their face, in interpreting those words a court must nevertheless ascertain and give effect to the intention of the parties who entered into the lease using such terminology, consistent with the purpose of the contractual provision at issue. Clearly, the intention of a landlord and tenant in including as such a termination right is for the purpose of allowing a tenant to terminate their lease if the impact of the cessation of business by its co-tenant has a detrimental financial impact on their business. In that such impact is going to be felt, if at all, immediately following the loss of their co-tenant, shouldn’t the courts impose a “reasonableness” standard on the tenant seeking to exercise its termination right, such that it must exercise that right, if at all, during an objectively “reasonable” period of time after its co-tenant ceased its operations? Or should the words “at any time” be taken literally, so that the tenant can exercise it termination rights years after the initial impact of having lost its co-tenant was first felt?
While there are no Arizona cases which provide clear direction to a trial court faced with this issue, the courts should be guided by the well-established general legal principles that a contract should not be interpreted in such a manner as to render it unreasonable, and that courts should avoid construing a contract so as to avoid an absurd result. Consistent with those concepts, it certainly would not be stretch for a court to impose a temporal limitation of “reasonableness” on the otherwise unlimited concept of “at any time.” Requiring that such a termination provision be exercised, if at all, within a “reasonable” period of time would also be consistent with the covenant of good faith and fair dealing that is implied in all contracts.