The party agreement: Interpretation and gap filling
Interpretatio The process of establishing one single meaning to the words
n explicitly used in the party (interprétation, Auslegung, uitleg)
Its aim is to establish one meaning for all parties affected by the
contract
Example
Newcom Ltd agrees that its customer Agri Gmbh is allowed to ‘give
back’ the machine it purchased within three months after delivery, it
could well be that seller Newcom intended Agri to be allowed to
terminate the contract only in the event of a defect with the machine,
while buyer Agri understood the term as allowing it to simply end the
contract at its own will.
The mere interpretation of the party agreement is almost never enough
to establish what the parties need to do under the contract
Three reasons
1. Parties cannot conceive of all possible contingencies that could
happen during the course of the contract
Example
If the contract is intended to last for a long time (residential lease
or franchise)
2. In most cases it is not efficient to negotiate and draft contracts
that aim to foresee all possible contingencies
Example
The contract would have to represent a high value to invest the
time and money to make this worthwhile (although it may be cost-
effective if the terms are to become applicable to many future
contracts, as in case of general conditions)
3. The law provides solutions to deal with incomplete contracts
In each jurisdiction the gap feeling/ supplementation of the party
agreement takes place in two different ways
, Ad hoc gap filling
Gap filling through
(supplementary/
default rules
constructive intrp.)
Parties did not provide for Interpretation of the party
a certain contingency agreement and
because it is such an supplementation by way of
obvious part of the ad hoc gap filling are not
contract sufficient
the party agreement is
supplemented with terms The gaps in the contract left by the
that follow from the parties are filled by the default
hypothetical will of the (facilitative) rules that are
parties in the automatically applicable in so far as
circumstances of the case the parties did not deviate from
them
If I rent a car from Hertz, the
rental company will have to
provide me with the car keys, Default rules provide standard
even though one will not find solutions for problems that typically
anything on this in the arise in certain types of contracts
contract/ general conditions (Terms implied in law-England)
If necessary the court fills the
gap in the party agreement by
speaking for the parties: they
do not consider the matter,
the court assumes what they
would have said
Interpretation of the party agreement
Subjective Search for the common intention of the parties
and objective Interpretation must be directed at ascertaining what parties have
interpretatio intended with it, not at what the court or anyone else finds the
n most ‘fair’, suitable or efficient interpretation
This search can take place from two fundamentally different
positions
Subjective Interpretation (what is the intention of the parties, as analysed
from the parties’ prospective)
Give preference to the ‘real’ intention of the parties
Since the words the parties used are only an expression of their
intention, it is this intention that should prevail
Difficulty with this approach
‘Actual’ intention of a party can never be established: even a
psychological or neuroscientific investigation into a party’s mind is
not likely to uncover the historical intention as it existed at the
time of concluding the contract
Objective Interpretation (what is the intention of the parties, as analysed
from the prospective of the reasonable person)
Interpretatio The process of establishing one single meaning to the words
n explicitly used in the party (interprétation, Auslegung, uitleg)
Its aim is to establish one meaning for all parties affected by the
contract
Example
Newcom Ltd agrees that its customer Agri Gmbh is allowed to ‘give
back’ the machine it purchased within three months after delivery, it
could well be that seller Newcom intended Agri to be allowed to
terminate the contract only in the event of a defect with the machine,
while buyer Agri understood the term as allowing it to simply end the
contract at its own will.
The mere interpretation of the party agreement is almost never enough
to establish what the parties need to do under the contract
Three reasons
1. Parties cannot conceive of all possible contingencies that could
happen during the course of the contract
Example
If the contract is intended to last for a long time (residential lease
or franchise)
2. In most cases it is not efficient to negotiate and draft contracts
that aim to foresee all possible contingencies
Example
The contract would have to represent a high value to invest the
time and money to make this worthwhile (although it may be cost-
effective if the terms are to become applicable to many future
contracts, as in case of general conditions)
3. The law provides solutions to deal with incomplete contracts
In each jurisdiction the gap feeling/ supplementation of the party
agreement takes place in two different ways
, Ad hoc gap filling
Gap filling through
(supplementary/
default rules
constructive intrp.)
Parties did not provide for Interpretation of the party
a certain contingency agreement and
because it is such an supplementation by way of
obvious part of the ad hoc gap filling are not
contract sufficient
the party agreement is
supplemented with terms The gaps in the contract left by the
that follow from the parties are filled by the default
hypothetical will of the (facilitative) rules that are
parties in the automatically applicable in so far as
circumstances of the case the parties did not deviate from
them
If I rent a car from Hertz, the
rental company will have to
provide me with the car keys, Default rules provide standard
even though one will not find solutions for problems that typically
anything on this in the arise in certain types of contracts
contract/ general conditions (Terms implied in law-England)
If necessary the court fills the
gap in the party agreement by
speaking for the parties: they
do not consider the matter,
the court assumes what they
would have said
Interpretation of the party agreement
Subjective Search for the common intention of the parties
and objective Interpretation must be directed at ascertaining what parties have
interpretatio intended with it, not at what the court or anyone else finds the
n most ‘fair’, suitable or efficient interpretation
This search can take place from two fundamentally different
positions
Subjective Interpretation (what is the intention of the parties, as analysed
from the parties’ prospective)
Give preference to the ‘real’ intention of the parties
Since the words the parties used are only an expression of their
intention, it is this intention that should prevail
Difficulty with this approach
‘Actual’ intention of a party can never be established: even a
psychological or neuroscientific investigation into a party’s mind is
not likely to uncover the historical intention as it existed at the
time of concluding the contract
Objective Interpretation (what is the intention of the parties, as analysed
from the prospective of the reasonable person)
