A more thorough explanation:

Definition: Ambiguity refers to language in a contract or agreement that can be interpreted in more than one way. This can cause confusion and disagreement between parties involved in the agreement.

For example, if a contract states that a product will be delivered "within a reasonable time," this phrase could be interpreted differently by each party involved. One party may believe that "reasonable time" means within a week, while the other party may believe it means within a month. This ambiguity can lead to disputes and legal action.

Ambiguity can be either patent or latent. Patent ambiguity occurs when the language in the document itself has more than one meaning. Latent ambiguity is not readily visible, but arises when the language which is unambiguous is applied to the subject matter with which it deals, and ambiguity appears because of some external circumstances.

For example, if a contract states that a product will be delivered to "the building," but there are multiple buildings owned by the company, this creates a latent ambiguity. The language itself is clear, but external circumstances (multiple buildings) create confusion about which building is being referred to.

When a contract is ambiguous, the courts may turn to extrinsic evidence to determine the original intention of the parties to understand the meaning of the language in a contract. Parol evidence may be used to understand the true intention of the parties as expressed in the agreement and thereby, understand the language of the latent ambiguity.