THE LAW OF CONTRACTS

(PART 5)

INTERPRETATION OF CONTRACTS

1. Where there is a dispute as to the terms of a contract made by word of mouth, it is necessary in the first instance to ascertain what was said, and the circumstances under which the alleged contract was formed. These are questions of fact to be determined by a jury.' The same is true of a written agreement. It must first be proved according to the rules of evidence; when proved, its legal effect is a question of construction for the court. The construction of all written instruments belongs to the court alone, whose duty it is to construe all such instruments as soon as the true meaning of the words in which they are couched, and the surrounding circumstances, if any, have been ascertained as facts by the jury; and it is the duty of the jury to take the construction from the court either absolutely, if there be no words of art or phrases used in commerce and no surrounding circumstances to be ascertained, or conditionally, when these words or circumstances are necessarily referred to them.*

Moreover, the obligation of a contract consists in its binding force on the party who makes it. This depends on the laws in existence when it is made. These are necessarily implied in all contracts and form a part of them as the measure of the obligation assumed by one party and the right acquired by the other."

1 Ans. Cont. (8th Ed.), p. 314.

26 Fed. Rep. 856 (1881).

3 165 Mass. 473 (1896).

48 M. & W. (Eng.) 806 (1841); 52 Fed. Rep. 354 (1892); 82 N. C. 249 (1880).

52 How. (U. S.) 608 (1844).

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GENERAL RULES OF CONSTRUCTION

INTENTION OF PARTIES

2. The most important rule of construction is that a contract is to be so interpreted, if possible, as to carry into effect the intention of the parties. Greater regard is to be had to the clear intention of the parties than to any particular words which they may have used in the expression of their intent. But the parties are bound by the words they have used which are to be understood in their plain literal meaning; they are not suffered to plead ignorance of the effect of the language of their own agreement.' Men will be taken to have meant precisely what they have said, unless from the whole tenor of the instrument a definite meaning can be collected which gives a broader interpretation to specific words than their literal meaning would bear."

A contract is to be understood by the language employed therein, not according to the views of its meaning entertained or alleged to have been entertained by one of the parties, the language of the contract being the best if not the only legitimate evidence of what the parties understood and intended. And while the writing may be read in the light of surrounding circumstances to more perfectly ascertain the intention of the parties, it is, nevertheless, the visible expression of their meaning and is neither to be contradicted nor explained away."

3. Mode of Determining Intention. -As the main object of construction is to arrive at the intention of the parties, this intention is to be ascertained from the whole instrument, not from particular words and phrases without references to the context;" and the instrument shall operate according to the intention, unless it be contrary to law." Where the meaning is doubtful, the circumstances at the

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616 Pet. (U. S.) 528 (1842).

7 Bish. Cont., Sec. 381; Ans. Cont. (8th

Ed.), p. 327; 67 Me. 163 (1878).

8 Ans. Cont. (8th Ed.), p. 327.

43 Iowa 439 (1876); 58 Conn. 39 (1889).

101 Greenl. Ev., Sec. 277.

11 11 Vt. 583 (1839).

12 14 Ad. & Ell. N. S. (Eng.) 891 (1850); 9 Pick. (Mass.) 422 (1830).

making of the instrument, and the subsequent acts of the parties, are to be considered in determining the sense of the words used." For when the language of a contract is ambiguous or susceptible of two meanings, the court will infer the intention of the parties from the circumstances attending the transaction, so far as they throw any light on the language used;" and the manner in which the parties have dealt with and treated the subject-matter, and the construction they have placed on the instrument with the actual or presumed knowledge or assent of each other, often have an important bearing on the subject."

Moreover, the courts will endeavor to give a reasonable construction to the agreement; and, therefore, in seeking for the intent of the parties, the fact that a construction contended for would make the contract unreasonable, and place one of the parties at the mercy of the other, may be properly taken into consideration."

The construction of a contract should be, when possible, in favor of its legality." The law does not assume an intention to violate the law, nor will an agreement be adjudged to be illegal where it is capable of a construction which will uphold it and make it valid.1o So, also, a contract should be construed in that sense in which it will have some effect, rather than in that sense in which it can have none, for the rule is that a contract should be supported and made effectual, rather than defeated, where this can be done by a fair and rational construction of the language used."

4. Another rule of the common law, originally applied to deeds, is that in cases of doubt, all instruments should be construed against the promisor or obligor, for the reason that the party who makes the instrument should take care to express his liability so as not to be bound beyond what it was his intention he should be.""

13 112 Pa. 442 (1886).

14 107 U. S. 437 (1882).

15 89 Wis. 612 (1895).

16 166 N. Y. 77 (1901).

17 163 N. Y. 437 (1900).

18 86 N. Y. 384 (1881).

20

1911 Am. Dig. (Cent. Ed.), p. 726, and cases therein cited; Cowp. (Eng.) 714 (1777); 118 Ill. 17 (1886); 2 Pars. Cont.,* p. 506.

206 M. & W. (Eng.) 605 (1840).

Grants of the sovereign are, however, an exception, being construed in his favor;" and, generally, contracts in favor of the public are to be construed liberally in its favor where the subject-matter concerns its interests." A strict construction in favor of the sovereign is not applicable where the grant is for valuable consideration; in such case, the rule of construction between the government and the subject is the same as between private grantors and grantees."

While the rule that a contract is to be construed most strongly against the promisor has been frequently applied, particularly in the case of insurance policies," it is one that has not met with much favor, and is admittedly the last to be resorted to and is to be applied only where other means of interpretation fail. The modern and more reasonable practice is to give the language its just sense, and to search for the precise meaning-a meaning that is requisite to give due and fair effect to the contract, without adopting either the rule of a rigid or of an indulgent construction."

LANGUAGE OF THE INSTRUMENT

5. In construing a contract, the words are to be taken in their plain, ordinary, and common acceptation," unless they have, in respect to the subject-matter, as by the known usage of a trade or the like, acquired a peculiar sense distinct from the popular sense of the same words, or unless the context evidently point out that they must, in the particular instance and in order to effectuate the immediate intention of the parties to that contract, be understood in some other and peculiar sense."

The parties have a right to attach an unusual or arbitrary meaning to their words, but to accomplish such a purpose and to vary the common understanding, the meaning should be plain, unambiguous, and free from reasonable doubt."

216 B. & S. (Eng.) 283 (1865).

222 B. & Ad. (Eng.) 792 (1831); 138 U. S. 1 (1890).

23 93 N. Y. 129 (1883).

24 170 U. S. 144 (1897).

252 Kent's Comm., p. 557.

26 21 III. 570 (1859); 59 Vt. 139 (1887).

27 103 N. Y. 341 (1886); 1 Cliff, (U. S.) 55 (1858); 4 East (Eng.) 130 (1803); L. R. (1895) 1 Q. B. Div. (Eng.) 749.

28 42 Md. 498 (1875); 30 Cal. 344 (1866).

Words, however, which are purely technical or local, that is, not in familiar use, but employed only in a particular science or trade, may be interpreted according to their technical use," unless the intention be apparent not to use the words in their technical sense, when the purpose of the makers of the instrument will control. This is true even where legal terms are used." Legal terms should usually be given their definite legal signification, but the mere use of technical words and phrases which have such a signification cannot be allowed to defeat the contrary intention of the parties, if that intention be manifest from the whole contract.'

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In construing a contract, every word and clause is to be taken into consideration and have an effect given to it, if possible." Where there are two clauses apparently repugnant, if they can be reconciled by any reasonable construction, that construction must be given." A word, not plainly inserted by accident or mistake, is never to be thrown out entirely, while there is a plain and natural construction which can be given to it, not manifestly destructive to the general intent of the sentence."

While it is highly desirable that contracts should be accurate in their language and conform to the rules of grammar, and while they will generally be construed according to the rules of grammar, the rule is not an absolute one. Inasmuch as the first object of the court will be to give effect to the true purposes of the contract," mere verbal slips and grammatical inaccuracies will be corrected in the light of the manifest intention of the parties." Effect will be given to the intent when properly ascertained, however clumsily the instrument is worded, regardless of a violation of the strict rules of grammatical construction."

6. The punctuation in a contract may be looked to for aid in ascertaining its true meaning, but the instrument may

29 42 Fed. Rep. 198 (1890); 165 Pa. 542 (1895).

3057 U. S. App. 526 (1898),

3158 Fed. Rep. 437 (1893); 177 Pa. 387 (1896).

32 10 Pick. (Mass.) 228 (1830).

33 90 N. Y. 430 (1882).

34 133 Pa. 134 (1890), at p. 140.

35 157 Ill. 605 (1895).

36 53 Minn. 42 (1893).

37 36 N. J. Law 432 (1872); 1 Wend. (N.Y.)

388 (1828); 48 Cal. 239 (1874).