Multiple Meanings in a Contract

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 What are Multiple Meanings of a Contract?

When used in a contract setting, the term “multiple meanings” refers to examples where a word or phrase in the agreement potentially has more than one meaning or interpretation.

For instance, 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.” Accordingly, a contract concerning a shipment for a “case of nuts” may have various implications depending on the context.

Therefore, phrases with multiple meanings can cause misconceptions and conflicts between the parties to a contract. For example, picture placing an order for peanuts, only to obtain a shipment of nuts and bolts. This is why it is so essential for contract drafting to be precise and straightforward, mainly when the contracts contain technical or trade terms.

What is “Contract Meaning”?

Contract meaning refers to how a term is defined in a contract record. For example, the word “bow” may refer to a ribbon or a weapon (such as “bow and arrow”). Here, if the contract refers to a ribbon type of bow, that is the contract definition of the term “bow” whenever it arises in the documents.

In most cases, words with multiple potential implications are depicted at the start of a contract or before they arise in the record. Regardless, sometimes a standard definition for a phrase is not given in the agreement. While the parties might have a history of using specific phrases in distinctive ways, this can also lead to misinterpretations and errors later on. Thus, the terms need to be clearly described in an agreement.

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

Some other illustrations of when contract quarrels based on numerous meanings issues may appear include when the contract has:

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

Whose Understanding of a Contract Phrase Wins?

In cases where a phrase in the agreement was mistaken or had numerous meanings, it will require following a comparative legal investigation as the one used for when there is a mistake in a contract. Accordingly, there are many things involved in the process of contract interpretation. The key, however, is in the first stage relating to a party’s knowledge.

First, the court or the parties’ attorneys will evaluate each party’s understanding of the phrase.

For instance:

  • When both parties have misunderstood or mistaken the meaning of a single word, then there is a chance that a contract was never created. To create a proper contract, there must be a “meeting of the minds” (i.e., the parties’ minds must be in consensus on all terms).
  • On the other hand, if just one party had a misconception about a particular word, but the other party recognized that party was confused, then the meaning that the confused party had will usually win. In other words, the meaning or interpretation that the misunderstood party had will be the one that will apply to the term in the contract.
    • The explanation for why the misunderstood party’s definition will apply is that the party who knew better could take advantage of the problem and use it to form the final contract. The knowing party would benefit from the unknowing party’s mistake.

It is crucial to note that contract interpretation can differ widely and may be based on a spectrum of other components or the relevant circumstances. For example, other factors that a court may consider are:

  • The parties’ previous transactions (e.g., have they entered into contracts before and for how long, which can resolve whether there was an existing misunderstanding);
  • Whether the word is something that an average individual would be able to determine and could have used the proper meaning;
  • Whether the context of the contract should have made the intention clear (e.g., a builder would not buy peanuts as part of their construction supplies);
  • If possible, what the parties seemed to intend the meaning to be.

Anytime a party has suspicions about a term or meaning of a word in the contract, they should voice their problem to the other party and discuss it before signing the final agreement.

If, even after they talk to the other party, they still feel uncertain (or if both parties are unclear about a certain word), they should consider getting a legal expert for further guidance on the matter.

What is an Unclear Contract Term?

An ambiguous contract term is a term that could have more than one meaning. A common vague agreement phrase is “dollar,” referring to U.S. dollars or dollars from other countries. Phrases that represent measurements can also become vague without context.

Furthermore, words that refer to subjective principles can be challenging to define in a contract. For example, this can be a problem if a buyer seeks “top grade” screws and nails or “Grade A” materials. Unless there is a standard, industrial meaning of “top grade” or “Grade A,” there may be a dispute over such phrases. These are usually resolved using industry norms from similar circumstances or by reviewing the parties’ previous transactions, if they have any.

What if an Agreement Term Is Disputed?

If there is a disagreement over a contract term, the parties can usually file a suit to have the courts decide the best interpretation of the agreement. When trying to decide the contract meaning of a word, courts will employ several factors:

  • The written documents
  • External proof
  • Different definitions of terms, including trade usages and everyday definitions
  • Verbal communications between the parties
  • Previous transactions of the parties

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

Contract interpretation can sometimes be a difficult task to complete and will often create more confusion. The reason for this is that the laws governing contracts are quite complex, but the contract document itself usually contains dozens of very minor and important details.

Therefore, if you have issues involving 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 and write up the final copy and review it. Using their services early on can help you avoid any contract disputes over multiple meanings of a term in the future.

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