Questions of interpretation: Overview, definition, and example
What are questions of interpretation?
Questions of interpretation refer to disputes or uncertainties regarding the meaning, intent, or application of contract terms. These issues arise when contract language is ambiguous, unclear, or subject to multiple interpretations. Resolving questions of interpretation often requires reviewing the contract as a whole, considering industry standards, or applying legal principles.
For example, in a business contract, a disagreement might arise over whether a deadline means "calendar days" or "business days." Similarly, in a licensing agreement, the parties may dispute whether a term grants exclusive or non-exclusive rights.
Why are questions of interpretation important?
Clarifying how contract terms should be interpreted helps prevent disputes and legal uncertainty. A contract should provide clear rules for resolving ambiguities, such as applying governing law, considering industry practices, or prioritizing specific clauses over general terms.
For businesses, addressing questions of interpretation in a contract ensures consistency, reduces litigation risks, and provides clear guidance if disputes arise. Including an interpretation clause helps ensure that all parties agree on how the contract should be read and enforced.
Understanding questions of interpretation through an example
Imagine a software development contract where a clause states that updates will be provided "periodically." The client believes this means monthly, while the developer interprets it as every six months. A questions of interpretation clause in the contract could specify that any ambiguity should be resolved in favor of industry standards or reasonable commercial expectations.
In another scenario, a service agreement states that a penalty applies for "late delivery." The client argues that this applies to any delay, while the provider claims it only applies if the delay exceeds 30 days. A contract with a strong interpretation clause would clarify how disputes over wording should be handled.
Example of a questions of interpretation clause
Here’s how a questions of interpretation clause might appear in a contract:
“In the event of any ambiguity or dispute regarding the interpretation of this Agreement, the terms shall be construed in accordance with their plain meaning and in a manner that best reflects the intent of the Parties. No provision shall be interpreted against the drafting Party solely due to its role in drafting this Agreement.”
Conclusion
Questions of interpretation arise when contract language is unclear or open to multiple meanings. Addressing these issues in a contract helps prevent disputes and ensures that all parties understand how the agreement should be interpreted.
By including a questions of interpretation clause, businesses can clarify how ambiguities should be resolved, reduce legal risks, and provide a framework for handling contract interpretation disputes.
This article contains general legal information and does not contain legal advice. Cobrief is not a law firm or a substitute for an attorney or law firm. The law is complex and changes often. For legal advice, please ask a lawyer.