In the context of a contract with hundreds of pages and multiple schedules, exhibits, appendices, and annexes, contractual language can be difficult to reconcile. Multiple provisions can appear to address a certain situation. One supports your business position; others may not support your business position.
Delaware courts pride themselves on adhering to an “objective” theory of contracts. Delaware courts often look to dictionaries and similar interpretive devices to understand what a party meant at the time they entered into a contract. Perhaps Delaware courts will one day look to large language model AIs to discern this “objective" intent, as Judge Kevin Newsome of the Eleventh Circuit has proposed.
In a recent dispute, the Delaware Court of Chancery was called upon to address a situation of multiple provisions addressing similar issues, with this case related to termination rights.
In this case, Comcast, a cable company, sued a customer service provider (the “Service Provider”) when the Service Provider invoked a right of termination. Comcast claimed that the Service Provider did not have a right to termination or that any purported right of termination was a scrivener's error that should be reformed.
In 2014, Comcast entered into a Master Services Agreement ("MSA") with the Service Provider's predecessor in interest. In that MSA, the Service Provider had negotiated from Comcast's standard terms, which included a one-sided right to termination for convenience, to include a bilateral right to terminate for convenience. Comcast signed the MSA with the bilateral right to terminate for convenience upon 30 days' notice.
Ten years later, in 2024, Comcast notified the Service Provider that Comcast would not review the MSA. The Service Provider's business team began to suspect that Comcast and Google, the new service providers whose software solutions formed the core of the Service Provider's infrastructure for Comcast, were going to strip the Service Provider's intellectual property during a transition period. At the time, the MSA with Comcast represented a significant majority of the Service Provider's annual profits.
To obtain negotiation leverage during the transition period, the Service Provider invoked its right to terminate the MSA for convenience upon 30 days' notice. Comcast sued, claiming that the Servie Provider had no right to terminate for convenience.
Comcast argued that other provisions of the MSA, together with the overall purpose to prevent Comcast from not having a customer service provider vendor, negated the bilateral right to terminate for convenience. Alternatively, Comcast argued that it should not be bound to this provision because it would not have agreed to a bilateral termination for convenience right and that the inclusion of this bilateral right was a mistake of fact by the person who executed the MSA.
The Delaware Court of Chancery disagreed. The Court found that the specific bilateral right to terminate for convenience prevailed over the more general provisions regarding termination in the MSA. The Court also held that, although the termination provisions were not the most artfully drafted and although the executive who signed the contract did not fully read it, there was no legal ambiguity or mistake of fact that would render the bilateral termination right inoperable. The facts at trial showed Comcast executives, as well as in-house legal teams, had reviewed several aspects of the MSA, including the bilateral termination right. Even though the specific executive who executed the contract did not review the contract before signing, Comcast failed to prove any mistake of fact or legal ambiguity.
This decision adds to Delaware's contractual case law of objective interpretation, rather than allowing negotiating positions or understandings to color the contractual language. Delaware courts will enforce the plain language of a contract or other agreement (such as a limited liability company agreement or a partnership agreement), particularly among sophisticated parties represented by counsel and regardless of any understandings at the negotiating table.
