Interpretations of contracts consist of the determination of the facts and to ascertain the content of the expressed intentions of the parties. By interpreting one determines the true meaning of the contract, which is needed for a proper executing of the contract or to solve disputes between parties.
Qualification of the contract
With the interpretation the contract a first important step is the qualification of the contract according to the legal system. The name of the contract given by parties is irrelevant. What matters is the qualification by the legal system and the articles, which come into being with the qualification in the certain case.
How does the Civil Code handle the interpretation of contracts?
The Civil Code refers to ‘intention of the contracting parties’ and seems to prefer a subjective interpretation instead of a objective interpretation. This means that the intention of parties in general is leading, instead of the meaning of words to the letter. Could it really be that the internal intention is more relevant than the expressed intention? No, that is not the case or else the outcome of a contract could be uncertain to start with. And that undermines the business market.
In interpreting a contract both parties in the contract need to be taken into consideration. The internal true intention of parties is considered together with the principle of legitimate expectations and the principle of good faith.
One needs to rely on the statement expressed by another party.
The Civil Code defines when the terms of a contract are clear and therefore leaves no doubt to the parties, the meaning of words to the letter rules. But, the contract has to be interpreted as a whole. This means a interpretation including the intentions of the parties, the behaviour of the parties during the contracting faze and during execution of the contract.
The Civil Code hands also criteria to interpret a contract such as; words are given the meaning according to the nature and object of the contract. Or vague clauses may not favour the party who has introduced it.
To have to absolute profit of a contract, it is advised to leave no space for misinterpretation or ambiguity. Better to know upfront what your obligations and rights are, than having problems during the execution.
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