When two parties enter into a contract, it is important that each party understands their rights and obligations under the terms of the agreement. In the event of a dispute, a court will be called upon to interpret the language of the contract to determine each party’s rights and obligations. So how do courts interpret contracts?
First, it is important to understand that courts will generally look to the plain meaning of the language in the contract. This means that the court will interpret the contract based on the words used in the agreement, and will not read in any provisions or meanings that are not explicitly stated in the contract.
Additionally, courts will consider the context in which the contract was created. This includes the circumstances surrounding the creation of the contract, the purpose of the contract, and any other agreements or understandings between the parties.
When interpreting contracts, courts will also look to any industry standards or common practices that may be relevant to the agreement. For example, if the contract is for the sale of goods, the court may consider the applicable provisions of the Uniform Commercial Code.
In some cases, courts may also consider the parties’ intent when interpreting a contract. This can be important when the language of the contract is ambiguous or unclear. In such cases, the court will look to any evidence of the parties’ intent, including prior negotiations, communications, and course of dealing.
Ultimately, the goal of contract interpretation is to give effect to the intent of the parties as expressed in the language of the agreement. This means that courts will strive to interpret the contract in a way that is consistent with the parties’ intentions, while also giving effect to the plain meaning of the contract language.
In conclusion, courts interpret contracts by looking to the plain meaning of the language, considering the context in which the contract was created, and looking to any industry standards or common practices that may be relevant. In some cases, the parties’ intent may also be considered. It is important for parties to ensure that their contracts are clear and unambiguous to avoid any potential disputes in the future.