Plaintiff contracted with Defendant for the installation of a geothermal heating and cooling unit for a home he was constructing. Plaintiff brought suit under theories of breach of contract and negligence—among other causes of action not relevant to this appeal— claiming that defendants had agreed to install a 5-ton unit and failed to do so, and claiming that the NVV048A unit did not properly heat his home. Defendants moved for summary disposition under MCR 2.116(C)(10), arguing that plaintiff’s breach-of-contract claim was without merit because plaintiff received a geothermal unit with a 5-ton heating capacity, which is the deal that plaintiff bargained for. The court concluded that the contract between plaintiff and defendants contained a latent ambiguity with respect to defendants’ reference to the size of the NVV048A as a 5-ton unit. In the trial court’s view, it was ambiguous whether the notation referred to the unit’s heating or cooling capacity. In any event, the court concluded that defendants had installed the exact model for which plaintiff had bargained, and that plaintiff had presented no evidence to support his suggestion that the unit did not function as expected. The court granted defendants’ motion for summary disposition, and this appeal followed.
STANDARD OF REVIEW
We review a trial court’s decision on a motion for summary disposition de novo. We review motions “brought under MCR 2.116(C)(10) by considering the pleadings, admissions, and other evidence submitted by the parties in the light most favorable to the nonmoving party.” “Summary disposition is appropriate . . . if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law.” We also review the interpretation of a contract as a question of law reviewed de novo, “including whether the language of a contract is ambiguous and requires resolution by the trier of fact.”
BREACH OF CONTRACT
Plaintiff first contends that the trial court erred when it granted summary disposition in defendants’ favor as to plaintiff’s breach-of-contract claim. Specifically, plaintiff contends the contract required installation of a 5-ton geothermal unit, and defendants installed a 4-ton unit, thereby breaching the contract. As noted, the trial court concluded the contract was ambiguous with respect to whether the notation in the contract to a 5-ton size referred to the NVV048A’s heating or cooling capacity. With reference to extrinsic evidence, the court found that the parties intended to install a geothermal unit that produced a 5-ton heating capacity, which is, in fact, what defendants installed. We can discern no error from the trial court’s finding. “A valid contract requires five elements: (1) parties competent to contract, (2) a proper subject matter, (3) legal consideration, (4) mutuality of agreement, and (5) mutuality of obligation.”). Consideration of extrinsic evidence is generally not permitted to interpret an unambiguous contract.). If a contract is ambiguous, however, extrinsic evidence is permitted to assist the trial court to determine the intent of the parties. Contract ambiguities are either patent or latent. “[E]xtrinsic evidence may not be used to identify a patent ambiguity because a patent ambiguity appears from the face of the document. However, extrinsic evidence may be used to show that a latent ambiguity exists.” A latent ambiguity exists when the language in a contract appears to be clear and intelligible and suggests a single meaning, but other facts create the necessity for interpretation or a choice among two or more possible meanings. To verify the existence of a latent ambiguity, a court must examine the extrinsic evidence presented and determine if in fact that evidence supports an argument that the contract language at issue, under the circumstances of its formation, is susceptible to more than one interpretation. Then, if a latent ambiguity is found to exist, a court must examine the extrinsic evidence again to ascertain the meaning of the contract language at issue. We agree with the trial court that a latent ambiguity existed with respect to the designation of the NVV048A as a 5-ton unit in the parties’ contract. The contract refers to the NVV048A as having a “5 TON” size, but it is unclear in the contract whether the notation refers to the heating or cooling capacity of the NVV048A, or whether it simply refers to the nomenclature of the manufacturer. What is uncontroverted, however, is that the unit installed in plaintiff’s house had a 4-ton cooling capacity and a 5-ton heating capacity, which, according to defendants’ unrebutted heat-loss analysis, was what was needed to satisfy plaintiff’s heating and cooling needs. Evidence presented in the lower court suggests that plaintiff at one time understood this difference. In an email exchange between plaintiff and Carpenter, plaintiff inquired whether a 4-ton unit would suffice for his home, and Carpenter responded that “a 5 ton is what is needed to heat your home, this is what was quote [sic] on the list you sent.” In our opinion, the extrinsic evidence demonstrated the parties’ intent was to install a unit that would heat and cool plaintiff’s house efficiently, and Carpenter explained that the NVV048A would do so on the basis of its 5-ton heating capacity.
We see no error in the trial court’s conclusion that plaintiff intended to contract for a geothermal unit with a 5-ton heating capacity, and that plaintiff did, in fact, receive that unit. Plaintiff received the benefit of his bargain with defendants, and the trial court did not err when it granted summary disposition in defendants’ favor as to plaintiff’s breach-of-contract claim
PUT OUR CONTRACT LAW EXPERIENCE TO WORK FOR YOU
When you are involved in a dispute over a contract, it is important to secure effective legal representation. As a client of Aldrich Legal Services, you will benefit from working with Michigan contract lawyers who have experience in litigating contract matters.