American Contract Law for a Global Age, 2017a

An Introduction to
TERMS AND INTERPRETATION
Having determined that an enforceable agreement exists and that none of the
contract defenses apply, we turn to what is, from a transactional perspective at least,
the most important part of the Contracts course, the question of what exactly does the
contract require? Along with issues of damages, raised later in these materials, the
interpretation of contract language is probably litigated more often than any other
issues. One federal judge remarked that by a rough estimate about 80 percent of the
breach-of-contract cases before him involved disputes over the meaning of terms.
An Imperfect Tool? Language by and large is a reasonably good tool for
conveying meaning. But it is not perfect. Most contracts are clear enough that no one
has concerns with what they mean. If your apartment lease requires payment every
first of the month and prohibits pets, we will most of the time understand what it
means. Most contracts are routinely performed without any dispute between the
parties. But when a problem arises in a contract, it is very often due to the fact that
the parties simply do not agree as to what they were supposed to do. Only after we
have decided on what the terms of the agreement are, and what obligations the
parties have assumed, can we determine whether one of the parties has breached.
Even in carefully written contracts, disputes can arise over what particular language
means. And when contracts are oral—and have to be reconstructed from unreliable
memories by biased litigants months or years after the events occurred—there is even
more chance of misunderstanding.
Interpretation . . . and Managing It at the Outset. Lawyers and judges in
general use much the same interpretive tool kit that ordinary humans do in ordinary
life—what exactly was said, how was it said, what was the context in which it was
said, what other people mean when they say the same thing, what the parties did
after it was said, and so on. Lawyers who draft and litigate contracts develop two
great but almost opposite skills: (1) the ability to craft language that says exactly
what the parties meant to say, and (2) the ability to develop alternative
interpretations of language that seems on its face to be plain.
Interpretation, however, includes much more than simply determining what
the language means. The law itself puts certain obligations on contracting parties.
Some of these can be changed or eliminated by agreement memorialized by careful
drafting, but some of them cannot. Moreover, on many issues that come up in contract
litigation the parties never actually discussed the issue. If you agree to purchase
Burge’s car, for example, the two of you may never discuss whether Burge is obliged
to deliver it to you, or you are obliged to pick it up from him. In these cases the law
(especially the UCC) often provides “default” terms that become part of the contract.
Every contract thus contains far more terms than the ones the parties have actually
______________________________________________________________________________
334 CHAPTER VI: TERMS AND INTERPRETATION