Rules for Interpreting Contract Meaning

Understanding Contract Interpretation

The interpretation of a contract refers to its meaning and significance. Several criteria or elements are used in this process.

Criteria for Finding Contract Meaning

Literal Interpretation (Words)

This involves a literal interpretation of the contract. If the terms of a contract are clear and leave no doubt about the intention of the contracting parties, the literal meaning of its clauses prevails. If a word appears to conflict with the clear intention of the parties, the intention will prevail over the literal word.

Systemic Interpretation (Terms)

Contract terms should be considered in relationship with each other. This is a systemic interpretation. The terms of the contract must be interpreted in relation to each other, attributing to any doubtful meaning the sense resulting from the combination of all terms.

Conduct of the Parties

This refers to acts at the time of completion of the contract (contemporary events), as well as subsequent acts or conduct if necessary. To judge the intention of the parties, one must primarily address their actions, both contemporary and post-contract.

Resolving Doubts in Contract Interpretation

Interpretation also aims at resolving questions that may arise. Different types of doubts can occur.

Doubts About Term Scope

Whatever the general terms of a contract, they should be understood within the context of the specific things and cases that the stakeholders proposed in the contract. Words with different meanings can be understood in the sense that is most consistent with the nature and object of the contract.

Doubts About Clause Scope

If any provision of the contract allows for multiple interpretations, it should be understood in the way most suitable to produce an effect. The interpretation of ambiguous clauses of a contract shall not favor the party who caused the ambiguity.

Doubts About Contract Meaning

The use or custom of the country is taken into account when interpreting ambiguities in contracts, filling in omissions with clauses that are usually established.

When it proves impossible to completely resolve any doubts using the rules established in the preceding articles, if these doubts concern accidental circumstances of a contract that is gratuitous, they will be resolved in favor of the reduced transmission of rights and interests. If the contract is onerous, the doubt is resolved in favor of greater reciprocity of interests.

If the question that cannot be resolved by these rules concerns the main object of the contract, making it impossible to ascertain the intention or will of the parties, the contract is void. This point is very important.