9. Contracts term and interpretation Flashcards
2 components in construing a contract
- Intention
- Expression
Intention and principle of self-determination
Subjective theory:
aims at seeking out the parties’ subjective understandings and is thus based solely on the inner intention of their communications or conduct
Expression and principle of reliance
Objective theory
aims at seeking out the objective assessment of an external, detached observer and is thus based solely on the outspoken meaning of the parties’ communications or conduct
Case study: Udall vs. Hill
- Hill (feeding stuff compounder) vs. Udall (mink breeder)
- Contract for the supply of an animal foodstuff.
- The contract described the basic expected “nutrition facts” of that foodstuff
- An ingredient of the supplied foodstuff contained a toxic agent which, though not unfit to animals in general, caused thousands of Udall’s minks to die
- Udall sued Hill for breach of contract
- Udall’s claim was dismissed
Case study: reasons for dismissal
what seller promised is determined by what his words and conduct would have led to the buyer to reasonably believe
does not depend on neither the seller’s personal intention nor the buyer’s intention since subjective intentions, if considered, can be interpreted in multiple perspectives
so unless belief was commonly shared -> dismissed
Differences between civil and common law jurisdictions in construing a contract
Civil law:
are generally keen to strike a balance between the objective and the subjective test, although the former is generally prevailing upon the latter
Common law
are generally keen to acknowledge solely an objective test, albeit variously moulded
Construing a contract within common law
- Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract
- Court’s task = ascertain the objective meaning of the language which the parties have chosen to express their agreement
- If detailed semantic and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business commonsense, it must be made to yield to business commonsense
- law excludes from admissible background the previous negotiations of the parties and their declarations of subjective intent
Interpretation of contracts in civil law and PICC
- A contract is to be interpreted according to the common intention of the parties rather than stopping at the literal meaning of its terms
- Where this intention cannot be discerned, a contract is to be interpreted in the sense which a reasonable person placed in the same situation would give to it.
- The statements and other conduct of a party shall be interpreted according to the party’s intention if the other party knew or could not have been unaware of that intention.
What are implied terms?
Since parties cannot generally set out all contractual rights and obligations under the contract -> only discuss those elements of the contract which they deem essential -> not established what will happen if one party does not perform the contract -> default rules
Elements of contract law
GENERAL PART
one body of norms which are applicable to any contract, notwithstanding its type
SPECIAL PART
additional sets of norms particularly applicable to single and most relevant types of contract -> they consist quite often in default rules which serve as gap-fillers of contractual agreements -> terms implied by law
Examples of traditional special contracts
- SALE (emptio-venditio)
- LEASE (locatio-conductio)
- LOAN (mutuum)
- DEPOSIT (depositum)
Implied terms in common law
are only rarely provided for by statutes and mostly desumed through proper interpretation of the parties’ agreement
