After various types of contracts, Wolff considers the more general problem of how to interpret them, that is, how to decide what the persons making the contract have wanted to say with the words in it. In other words, the question is of the intentions behind the linguistic expressions.
Wolff at once notes that interpreting contracts involves something very different from interpretation in general. Usually, it is all just about clarity. If the words have a fixed meaning and the writer or speaker is known to express their intentions sufficiently, no further interpretation is required. If the words or their meanings are not clear, we can then just simply ask the writer or the speaker to explain them further, since they know best what they intended to say.
In case of contracts, Wolff points out, there is something that interrupts this simple scheme: obligations. Now the person promising to do something is not the best person to ask what they meant by their words, since they might wish to deny some obligations they had promised themselves to. Similarly, the person who the promiser is obligated to is also not fit for interpreting the words, because they might want to have the promiser provide them more than was accepted.
The interpretation of contracts, Wolff concludes, should then happen through certain rules that can be accepted by all parties involved. In the best case, he adds, these rules could be demonstrated as being the correct ones. When the rules and the corresponding right interpretation have been decided, the obligations are now determined.
To make interpreting easier, Wolff notes that people making the contract should speak in such a manner that they can understand one another. More particularly, they should use the words in such a manner that makes their speech understandable – Wolff calls this using the proper meaning of the words. More generally, they should use all terms in the received sense and they should not knowingly and willingly depart from this. From the standpoint of interpretation, Wolff continues, the words should be presumed to be received in their proper meaning and terms in their received sense, unless some urgent reasons to the contrary appear. In other words, interpretations should mostly follow the common use of words.
Wolff takes into consideration that the contracts are sometimes interpreted much later than they have been made. In such cases, he notes, the interpretation should use meanings that the words had at that earlier time. Then again, he adds, the interpretation should not follow what he calls the etymological meaning of the words, that is, the supposed original meaning of the words, from which the later meanings have evolved.
Wolff observes that if the persons making the contract have expressly said how the contract should be understood and the contract has only common words with clear meanings, the interpreter should follow the common meaning of the words closely. More generally, if it becomes evident, what sense of the words agree with the intentions of the people making the contract, it is not allowed to suppose any other intentions behind the words. If the contract contains some technical terms, they should be generally interpreted by definitions common in the discipline in which they are used.
Wolff also considers homonymy, where the same word has different meanings, and amphiboly, where the same expression consisting of many words has different meanings. Obviously, homonymy and amphiboly cause difficulties for interpreting contracts. Wolff notes that in some cases different occurrences of the same word or expression might have to be interpreted in different manners. Generally, he adds, if homonymy or amphiboly make the intention of the contract obscure, the meaning agreeing best with the topic in question should be preferred.
A strict rule Wolff endorses is that any interpretation leading to something absurd should be rejected. This rule is to be followed, even if it would mean ignoring the proper meaning of the words. In particular, contradictions should be avoided.
Contracts are often long pieces of text, and while some passages might be transparent, others might still be obscure. In such cases, Wolff notes, the obscure parts are to be interpreted in a manner that agrees with the clearer passages. More generally, he continues, the different parts of the text should be usually interpreted in such a manner that they agree with one another, unless it is evident that e.g. later parts of the text change what was said in earlier parts.
Since the contracts are the expression of the volitions of the persons making it, interpreting them often involves studying the intentions of those persons. Thus, Wolff says, if we know the reason why the persons behind the contract wanted to say what they say in the contract, the words of the contract are to be interpreted in such a manner that they agree with this central reason. If there were many different reasons that all in conjunction made the persons to do the contract, the interpretation should agree with the sum of these reasons. Then again, if we know many alternative reasons that could have been behind the contract, the interpretation should agree with these reasons in separation.
Wolff notes that contracts often have what could be called favourable and burdensome parts. Favourable in contract is, Wolff defines, what cares for the common good of all sides of the contract, while burdensome is what burdens one side more than the others – an example of latter would be penalties attached to a contract. In interpreting the favourable parts, Wolff insists, words should be understood in the most extensive sense they can be, unless this interpretation would lead to some absurdities or unless a stricter reading would be more useful for all participants of the contract.
On the other hand, Wolff thinks, when interpreting the burdensome parts of the contracts, words are to be taken in a stricter sense, although even a figurative understanding of the words is admitted, if this helps to avoid great burdens. In the particular case of punishments, this rule implies that placing guilt upon a person would require stricter definitions, so that there would be more reasons not to punish anyone. Similarly, if a person has promised something quite liberally, a more lax interpretation is to be avoided if such would burden the person who promised too much.
Another general rule Wolff suggests is that interpretation should be made in such a manner that the speaker or writer would have interpreted it, if they were present and knew all relevant circumstances that had become common knowledge after the contract has been made. Thus, if the sufficient reasons behind the persons making the contract were known, the same interpretation could be extended to cases which literally are not included in the terms of the contract, but would agree with these sufficient reasons.
Continuing with the negative case, Wolff adds that if some case would literally agree with the terms of the contract, but would somehow contradict the intentions of a person in the contract, the interpretation should restrict the meaning of the words. Similar exceptions to terms of a contract can be made, according to Wolff, when following the strict meaning of the words would contradict natural law or would be too burdensome to some person involved in the contract.
An interesting case occurs when two contracts contradict one another and some exception has to be made. Wolff notes that because a contract contains promises and therefore causes obligations, it can be handled similarly as laws. Thus, following what he has said in a previous part of his study on natural law on collision of laws, he notes that if one contract e.g. permits or even orders something that another contract forbids, the forbidding contract is to be preferred. More generally, contracts involving stronger obligations trump contracts with weaker obligations. Thus, a contract with an oath or a penalty attached to it is to be preferred to a contract without them. If no reason for choosing one contract over the other is found, the decision can be made by agreement of all persons involved or even by lot.
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