Edited by Jan M. Smits
Chapter 35: Interpretation of contracts
Like dreams and artistic creations, legal texts may need interpretation. Not for the same reasons, however, the difference being that a legal text, such as a statute or a will, by the use of words intends to express the will of the author of the text. The text may need clarification of its meaning. In this sense interpretation of a contract can be defined as the determination of the meaning that must be attached to the declarations made by the contracting parties and of the legal effects created by these declarations. One of the most important topics in the law of contract is indeed that concerned with how to establish the effects of the contract; in other words what, in case of dispute, is or is not an obligation according to the contract. The function of the contract is to be a legal form for autonomous regulation. What the parties have decided themselves in the contract is decisive within the frame of freedom of contract. But parties often make an unclear or incomplete contract, and they often have divergent opinions as to what it means. Contracts, like other forms of linguistic expression, suffer from the problem of unclear meaning. The term ‘interpretation’ – the term ‘construction’ is often used as a synonym – refers to the process by which a court gives meaning to contractual language when the parties attach materially different meanings to that language.
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