Statutory rules prioritising contract interpretation - Weagree

Statutory rules prioritising contract interpretation

You might have read my blog post from January 2010, or otherwise the blogs I posted earlier today on contract interpretation and national legal cultures (here, here and here). In that case, you might be aware that contract interpretation remains a matter of taking into account the entire context and not necessarily (or rather: preferably not) the mindlessly written boilerplate clauses or the referred-to general terms and conditions. In this blog post, I will touch upon statutory rules that deal with contract interpretation, by providing certain guidance (and guidance only).

Rules prioritising interpretation. A few provisions of the CFR clarify that negotiation of a provision increases its enforceability. This is understandable because the more comprehensive discussions about the ins and outs of a provision were, all the more reluctant a court must be in attributing a meaning, which is not at once apparent. Another important interpretation rule (Art. II. 8:106) is that presumably a contract provision was given a meaning or intended effect. If a provision is ambiguous or contains errors, the mere reliance on such ambiguity or error without further merit should not be protected if another interpretation puts a meaning on it.

II. – 8:104: Preference for negotiated terms
Terms which have been individually negotiated take preference over those which have not.

II. – 8:105: Reference to contract as a whole
Terms and expressions are to be interpreted in the light of the whole contract in which they appear.

II. – 8:106: Preference for interpretation which gives terms effect
An interpretation which renders the terms of the contract lawful, or effective, is to be preferred to one which would not.

The Restatement (Second) of Contracts emphasises other aspects of contract interpretation. Interesting enough, the written terms are not necessarily determinative:

§ 203. Standards of preference in interpretation
In the interpretation of a promise or agreement or a term thereof, the following standards of preference are generally applicable:

(a)  an interpretation which gives a reasonable, lawful, and effective meaning to all the terms is preferred to an interpretation which leaves a part unreasonable, unlawful, or of no effect;
(b)  express terms are given greater weight than course of perfor­mance, course of dealing, and usage of trade, course of performance is given greater weight than course of dealing or usage of trade, and course of dealing is given greater weight than usage of trade;
(c)   specific terms and exact terms are given greater weight than general language;
(d)  separately negotiated or added terms are given greater weight than standardized terms or other terms not separately negotiated.

Altogether, the importance of one interpretation rule or another is yet a matter of judgement and is not inevitably part of the reasoning a court gives. Where the principles revert to different standards, their actual significance may well differ from country to country or even from judge to judge.

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