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How is a contract interpreted by the court?

In the legal system, as in life, everyone is expected to play by the rules. There are a number of different kinds of rules that govern a legal dispute between Michigan residents, including rules about the procedure of the case, rules that determine what evidence is or is not admissible and rules that apply to the court process itself.

There are also different kinds of rules that apply in particular cases, such as contract disputes. Last week, this blog discussed a contract dispute between a pop singer and her record label. As discussed in that post, parties may dispute what was intended by a particular contract provision.

In order to resolve these different arguments made by the parties, there are rules of contract law that tell the court how to interpret a contract. These rules apply for business contracts, employment contracts or other kinds of contracts as well.

For example, one rule of contract interpretation is to consider the entire agreement as a whole. This means that different provisions of the contract may be read together to shed light on what the parties actually intended in a specific provision.

The words of the contract are interpreted according to their ordinary and common meaning, unless the parties intended otherwise. Accordingly, a disputed provision typically will not be given a highly technical meaning unless it was intended by the parties. At the same time, the conduct of the parties may be considered in some cases as evidence of their intent.

Ultimately, the rules of contract interpretation are designed to determine what the parties intended when they entered into the contract. Once these rules are applied and the parties intent is determined, the contract will then be enforced according to that intent.

Source: Michigan Courts, "Model Civil Jury Instructions," accessed on Feb. 13, 2016

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