Fundamental principles of contract interpretation – part 2

Part 2 on Fundamental Principles of Contract Interpretation

Contract Intepretation

This is the second in a series of articles about contract interpretation.

In part one of this series, we discussed the following:

  • the four corners test
  • interpreting ambiguities against the party that drafted the contract
  • the requirement that the court construe the contract as a whole
  • construing a contract in a reasonable manner.

In this article, we will examine three more rules of contract interpretation.

General versus specific words in the contract.

The law states that specific terms in a contract override inconsistent general language. This is the principle of “ejusdem generis.”

Returning to an example in our first article, assume Party A and Party B enter into a contract. The contract states in many places that Party B will make deliveries of goods on the fifth day of each month. But, due to a drafting error, in one place the contract says deliveries will be made “on a regular basis.”

The numerous specific provisions calling for delivery on the fifth of the month will control over the one, general reference to “regular basis” deliveries.

Interpretation of the contract using common definitions.

If the parties disagree about the meaning of a particular word in the contract, the court will use the common, ordinary definition of the word.

But, there is an exception to this rule. When the parties use a word in a technical sense that is regularly used in their industry, the court will adopt the technical meaning.

For example, the word “ram” has many meanings, including:

  • a male sheep
  • a water raising machine
  • random access memory in a computer.

If the term “ram” appeared in a contract between two computer companies, the court certainly would not think the parties meant a male sheep.

Writing controls over typed words.

Often times, parties will sit down with a typed contract. Then, they will negotiate certain changes. Rather than have the contract re-typed, they will simply write in their changes.

If there is a conflict between typed portions of the contract and the handwritten portions, the latter will control. This is because the handwriting shows that the parties specifically thought about and discussed the handwritten language.

If you need a contract drafted or reviewed, contact the Panter Law Firm at 601-607-3156 for a consultation.

Panter Law Firm, PLLC, 7736 Old Canton Road, Suite B, Madison, MS 39110

Craig Painter