When applied in a contract setting, the phrase “multiple meanings” refers to instances where a word or term in the contract has potentially more than one definition or interpretation.

For example, the word “nut” may mean a type of food, such as a “peanut” or a “walnut.” Alternatively, it could also be a reference to a building tool, as in “nuts and bolts.” Thus, a contract regarding a shipment for a “case of nuts” may have different meanings depending on the context.

Terms that have multiple meanings can therefore cause misunderstandings and disputes to arise between the parties to a contract. For instance, imagine placing an order for peanuts, only to receive a shipment of nuts and bolts! This is why it is so important for contract drafting to be clear and unambiguous, especially when the contracts include technical or trade terms.

What are Some Other Examples of Multiple Meanings in a Contract?

Some other examples of when contract disputes — based on multiple meanings issues — may arise include when the contract has:

  • Words that have multiple meanings or synonyms (like in the above discussion regarding the word “nut”).
  • Words that sound phonetically the same, but actually have different spellings and meanings, such as:
    • Bread and bred;
    • Meet and meat; or
    • Carrot, carat, and caret.
  • Any type of word or phrase regarding weight, measurement, or references to the quality of a product (e.g., “Grade A”).
  • Terms that are highly technical or specific to a particular industry and require proper training and experience to be able to grasp their true meanings.
  • Words that are difficult to define precisely, or have vague or ambiguous meanings.
  • Phrases from other languages that are different from the language that was used to draft the contract.

Whose Interpretation of a Contract Term Prevails?

In cases where a term in the contract was misunderstood or has multiple meanings, it will require following a similar legal analysis as the one used for when there is a mistake in a contract. Thus, there are many things involved when it comes to the process of contract interpretation. The key, however, is in the first step and relates to a party’s knowledge.

First, the court or the parties’ lawyers will try to assess the knowledge that each party has of the term. For example:

  • When both parties have misinterpreted or misunderstood the meaning of a single term, then there is a possibility that a contract was never formed. In order to form a valid contract, there needs to be a “meeting of the minds” (i.e., the minds of the parties must be in agreement on all terms).
  • On the other hand, if only one party had a misunderstanding about a specific term, but the other party realized that party was confused, then the meaning that the confused party had will usually prevail. In other words, the definition or understanding that the misunderstood party had will be the one that will apply to the term in the contract.

    •  The rationale for why the misunderstood party’s definition will apply is because the party who knew better could take advantage of the situation and use it to their benefit to form the final contract. Basically, the knowing party would profit from the unknowing party’s error.

It is important to note that contract interpretation can vary widely and may be based on a range of different elements or the relevant circumstances. For instance, other factors that a court may consider are:

  • The parties’ prior dealings (e.g., have they entered into agreements before and for how long, which can determine whether there was an actual misunderstanding);
  • Whether the term is something that an average person would be able to define and could have applied the proper meaning;
  • Whether the context of the contract should have made the meaning clear (e.g., a builder would not purchase peanuts as part of their construction supplies);
  • If possible, what the parties seemed to mutually intend the meaning to be; and
  • Sometimes the court will request that the parties hand over additional documents (as opposed to only the contract itself) to determine if there was any external evidence that would prove the true meaning of the term.

Therefore, as is evident from the above discussion, any time that a party has doubts about a term or meaning of a word in the contract, they should express their concern to the other party and discuss it with them before signing the final contract.

If even after they speak to the other party they still feel unsure (or if both parties are unclear about a particular phrase), they should consider contacting a legal professional for further advice on the matter.

Do I Need to Hire a Lawyer for Help with Contract Interpretation?

Contract interpretation can sometimes be a difficult task to complete and will oftentimes result in creating more confusion. The reason for this is because not only are the laws governing contracts quite complex, but also the contract document itself usually contains dozens of very minor and important details.

Therefore, if you are having issues that involve contract interpretation, you should consider contacting a local contract lawyer for further assistance.

An experienced contract lawyer can go over your contract with you and explain what legal recourse you may have against any misinterpretations in the contract. A lawyer will also be able to represent your interests in either a settlement capacity or in a courtroom.

Additionally, you should always seek the counsel of an attorney before you draft a contract. They will be able to assist you with the negotiation stage, as well as with writing up the final copy and reviewing it. By using their services early on, it can help you to avoid any contract disputes over multiple meanings of a term in the future.