In contract law, ambiguity is a term used to describe situations in which the terms of a contract have multiple definitions or refer to multiple subjects.
Patent ambiguity is that ambiguity which is apparent on the face of an instrument to any one perusing it, even if he be unacquainted with the circumstances of the parties. In the case of a patent ambiguity parol evidence is admissible to explain only what has been written, not what it was intended to write. For example, in Saunderson v. Piper, 18 39, 5 B.N.C. 425, where a bill was drawn in figures for X245 and in words for two hundred pounds, evidence that "and forty-five" had been omitted by mistake was rejected. But where it appears from the general context of the instrument what the parties really meant, the instrument will be construed as if there was no ambiguity, as in Saye and Sele's case, io Mod. 46, where the name of the grantor had been omitted in the operative part of a grant, but, as it was clear from another part of the grant who he was, the deed was held to be valid.
Latent ambiguity is where the wording of an instrument is on the face of it clear and intelligible, but may, at the same time, apply equally to two different things or subject matters, as where a legacy is given "to my nephew, John," and the testator is shown to have two nephews of that name. A latent ambiguity may be explained by parol evidence, for, as the ambiguity has been brought about by circumstances extraneous to the instrument, the explanation must necessarily be sought for from such circumstances.