This is another case highlighting the importance of careful contract drafting. In Hobwen, Inc v Sisbro Management, LLC, the owner of a Wendy’s restaurant sued the defendant, who planned to open a Taco Bell next door. The land on which the Wendy’s was located was benefited by a restrictive covenant stating that the defendant’s neighboring property “shall not be used for a restaurant use, the primary business of which is the sale of hamburgers, hamburger products or chicken sandwiches (or any combination thereof).”
The plaintiff sued the defendant arguing that defendant would violate the restrictive covenant because Taco Bell sells “hamburger products.” The plaintiff argued that “hamburger products” was synonymous with “ground beef products”, and that because Taco Bell sold tacos containing ground beef; the terms of the restrictive covenant were violated. The defendant made two arguments in response: (1) That the restriction prohibited hamburger restaurants that would compete with a Wendy’s; and (2) that the language of the restrictive covenant was vague, and as a result, it was unenforceable.
The Michigan Court of Appeals was left to determine what “hamburger products” meant. In doing so, the Court of Appeals relied on a 1984 dictionary definition of hamburger. The dictionary contained three different definitions, all of which described a hamburger as “ground beef.” Accordingly, the Court of Appeals ruled that the plain and popular meaning of “hamburger products” was “items made of ground beef.”
Surprisingly, the Court of Appeals ruled that the term as used in the restrictive covenant was not ambiguous, because it was not susceptible to multiple meanings. The Court of Appeals prohibited the Taco Bell restaurant on the basis that it was going to sell “hamburger products.”
The moral of the story is that parties to contracts should carefully define key terms so that the courts need not resort to nearly thirty-year old dictionary definitions, and reach a result which is probably contrary to the intent of the parties.
