The Interpretive Toolbox

• Author: Franklin G. Snyder, Mark Edwin Burge
• Pages: 357-380

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UNIT 18: THE INTERPRETIVE TOOLBOX 357

Unit 18

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TERMS AND INTERPRETATION

Part Two

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The Interpretive Toolbox

FOCUS OF THIS UNIT

Issues of formation, consideration, capacity, and defenses all go to the question

of whether the parties actually have an enforceable contract. In the great majority of

disputes, however, parties agree that they have a contract. They may even agree on

the precise text contained in the contract. Their disagreement is on what it means.

Context-Dependent Clarity. Most of the time, words in a contract do not create

interpretation disputes. A contract that requires delivery of the British paperback

edition of J. K. Rowling’s book Harry Potter and the Philosopher’s Stone in exchange

for $8.99 plus $2.50 shipping and handling means precisely that, and there is very

little room for the parties to argue that the parties actually meant Jane Austen’s book

Emma and that the price was supposed to be $4.00 with free shipping.

Even when the words themselves are perfectly clear, their meaning can differ

substantially based on the context in which they are said or even from tone of voice.

We intuitively understand the importance of context and tone even when we do not

actively think about such matters. The sarcastic “Nooooooo” from a teenager might,

in context, mean “Yes, of course, you moron. Duh!” Many words also carry more than

one common meaning which may have to be deduced from the context. The word

“greens,” for example, will obviously mean something different in a contract that

refers to “tees, fairways, roughs, and greens” than it will in a contract that refers to

“reds, yellows, blues, and greens.”

Objective or Subjective Meaning? When interpreting contracts, a tension

frequently exists between “objective” and “subjective” meanings of certain terms.

When two parties have expressed an agreement in words, one approach is simply to

enforce what they wrote as the terms would appear to an ordinary reasonable person.

You may recall that formation of contracts occurs based on an objective

understanding of the parties’ actions. Objective standards value simplicity and

predictability. If the parties have used a writing, the plain language of which does

not really reflect their actual bargain, then it is the parties’ fault when they do not

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358 CHAPTER VI: TERMS AND INTERPRETATION

get the deal they intended, and the solution is to express themselves more clearly in

the future.

The alternative approach is to look at the words as merely part of the overall

transaction, and to try to determine not what the document says to a reasonable

reader, but what the parties subjectively meant it to say. The goal in the subjective

approach is to carry out the “real” bargain of the parties, which may be different than

what they wrote. The benefit, when this approach works correctly, is that the parties

get what they really intended. The downside, of course, is the uncertainty inherent

in proving subjective meaning.

Subjectivity in Action. Note that if both parties agree that the contract’s

language is inaccurate and they agree as to what it should be, no problem exists.

Courts will always enforce an agreed subjective meaning, and the parties are less

likely to have gone to court in the first place. Much more often, however, one party

claims that the deal means exactly what was written, and the other party claims that,

in the context of their deal, the parties meant something else entirely. The question

is not whether the parties’ “real” meaning should control. The question is, rather,

whether we are more likely to find the real meaning in what the parties wrote at the

time, or what they now say they meant.

Since no perfect answer to that question exists and since what two parties

“really” meant is impossible to know with complete certainty—even assuming that

they both meant the same thing

1

—courts and other decisionmakers naturally

struggle with interpretation. Given this landscape, a principal goal of transactional

lawyers is to do their best to remove possible uncertainties and ambiguities from

contracts. Careful drafting can go a long way in avoiding problems. In contrast,

contract litigators, who are typically called to service once the parties are already in

a dispute, will seek either to exploit or to patch over these uncertainties, depending

on their particular client’s position.

The Interpretive Toolbox. When a dispute arises, and a choice of meanings

exists, how does the interpreter of a contract choose the “correct” meaning? We all

make this sort of judgment dozens of times each day, as we interpret the words people

say in light of their context—a handy word encompassing all the surrounding facts

that help give words meaning. If the heroine in the romance novel snarls, “I hate

you!” at the hero with whom she has been adventuring for the last 200 pages, context

may suggest she means something very different from her literal words. We deduce

such things from all the circumstances so often that we scarcely realize we are doing

it.

1

[This assumption is a huge one. The idea that there is some kind of “real” deal between the

parties depends on the premise that they meant the same thing at the outset. We have seen the parties

sometimes have very different ideas about what they agreed to. —Eds.]