Contract Interpretation

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What Is Contract Interpretation?

Contract interpretation is needed if there is a dispute over the terms, words, or definitions in a contract. If the parties cannot agree on what a certain contract term means, they may need to file a lawsuit in order to have the contract reviewed by the court. If this happens, the court will engage in contract interpretation in order to resolve the disagreement. 

The ultimate aim of contract interpretation is to arrive at a definition that most clearly reflects the original intentions of the parties. Thus, a judge may have to “interpret” a contract in order to determine what the parties’ intentions or understanding were regarding a specific provision when that provision was originally agreed upon by the parties. 

Contract interpretation usually becomes necessary due to a mutual mistake, where both parties were mistaken, or unilateral mistake, where only one party was mistaken. For example, in a shipping contract, the parties may be mistaken as to whether the word “delivery” means delivery by land or by air. The court will then perform contract interpretation to determine exactly what the parties meant by the word when they drafted the contract.

How Are Contracts Interpreted?

The rules for interpreting contracts may vary according to state laws, as well as the nature or subject matter of the contract. In general, most courts will follow a few basic principles during contract interpretation. Some of the basic principles involved in interpretation of a contract include:

Thus, contract interpretation often involves a delicate balance between technical usages of terms and normal, everyday meanings of words.

Are There Any Other Aspects of Contract Interpretation That I Should Know About?

Besides these basic principles for contract interpretation, there are few other aspects that are helpful to know about:

Thus, it is best to make sure that all the terms are clear and precisely indicated in the contract. Furthermore, the parties should make sure that everyone involved understands the terms and that they are on the same page when it comes to definitions of certain words at the time of contract formation. It also helps to have a lawyer review the contract before it is signed and be present during negotiations. These steps can help eliminate the need for contract interpretation in court later on.

Do I Need a Lawyer for Help with Contract Interpretation?

Contract interpretation often requires skill and creativity on the part of the court or judge. The court may have to examine many different underlying factors when determining the parties’ intentions. A business lawyer can help you draft, review, and edit a contract in order to make sure the parties are in full agreement. Also, if a lawsuit is filed, your lawyer can help explain how contract interpretation might effect the outcome of the case. 

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Last Modified: 08-07-2014 10:28 AM PDT

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