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Tender Loving Care Ambulance & Ambulette Co., Inc. v. Meridian Hospitals Corporation

A-2446-01T3 (N.J. Super. App. Div. 2003) (Unpublished)

CONTRACTS—Where the terms of a contract extension agreement are unclear, courts will compare it to the original underlying agreement to determine what the parties may have intended in their extension agreement.

A hospital and an ambulance company entered into a December 3, 1991 agreement. It provided for two options to extend the term of the agreement. The first gave either party “the option to renew this contract under the same terms and conditions [set forth] herein, for an additional three (3) year option term upon [one party notifying the other in writing] at least three (3) months prior to the expiration of the original term [set forth] herein. An additional three (3) year option shall also be exercisable by either party hereto upon written notification to the other party on the same terms and conditions [set forth] herein provided said notification is sent three (3) months prior to the expiration of the original option term.” On May 17, 1993, the parties entered into another agreement “under which they expressed their ‘desire[] to extend our existing ambulance transport contract for an additional three (3) years to May 17, 1997.’” A three year renewal only would have taken the contract to May 17, 1996. Further, this 1993 agreement provided that “[o]ur original contract will remain in force through this extension period.” On October 17, 1996, the ambulance company’s counsel wrote to the hospital’s counsel stating the ambulance company’s “intention to exercise its renewal for an additional three (3) year term,” i.e. from May 17, 1997 through May 17, 2000. On July 25, 1998, the ambulance company’s attorney advised the hospital by letter of its intention to renew the contract for one more additional term into the year 2003.

A dispute arose between the ambulance company and the hospital and one of the issues was the termination date of the contract. Here, the Court concluded that the May 17, 1993 agreement “constituted an exercise of [the ambulance company’s] first option under the December 3, 1991 agreement.” Then, the lower court submitted to a jury the question whether the second letter (October 17, 1996) “constituted a timely exercise of the second option renewal under the 1991 contract.” Lastly, it ruled that the June 25, 1998 letter “purportedly exercising an option extending the contract to 2003” was “above and beyond the terms of the contract” and thus invalid.

On appeal, the ambulance company argued that the May 17, 1993 agreement was not an exercise of its first option. It argued that it was an extension of the agreement and, as such, it preserved the two three-year options under the 1991 agreement. The Appellate Division disagreed with the ambulance company and was “satisfied that the relevant contract terms [were] clear and unambiguous.” The May 17, 1993 agreement clearly was in writing and was entered into at least three months prior to the expiration of the original term. Further, the May 17, 1993 agreement to extend the original contract used language that tracked the option provision in the December 3, 1991 agreement. In addition, the Court was dissatisfied with the ambulance company’s interpretation because it would have resulted in a contract “having a potential twelve and one-half year term” and the Court could not “glean from the record that such a result was logically intended by the parties.”


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