Context is everything

February 20, 2011

In the wording of any written contract, there must be no ambiguity of meaning. To achieve this is critical in three respects:

1. Any words, terms and phrases that could have more than one meaning must be identified and discussed at the outset by the parties to a contract, and then must be clearly defined in the contract itself to the satisfaction of all parties.

2. The court, upon reviewing the contract, must be able to understand the unique and particular meaning of those words, terms and phrases that could have been ambiguous, and concur that the agreed-upon meaning of each makes sense within the greater context of the entire contract and its intended purpose. That is, correct interpretation suggests the necessity that the court not compartmentalize isolated words and phrases to arrive at their meaning; rather, the court will normally examine a contract through the lens of generally accepted business practices and meanings, together with its understanding of the intent behind the contract. Therefore, the contract – and the use specifically of ambiguous terms – should be written taking this into account.

3. The parties to the contract must carefully review it before affixing final signatures, especially seeking to eliminate any possible ambiguities that could arise. Such attention to clarity will have impact not only on the present document and any legal ruling pertaining thereto, but the parties to future agreements will be comfortable making reference to it when designing their own contracts.