Contract Law: Defining Conflicting Terms- Part 2
Previously on the blog, we discussed ambiguous and conflicting terms in contracts. Most contracts include clauses which provide interpretation rules for ambiguous and conflicting terms. In the absence of such a clause (or if the provisions of the clause do not resolve the conflict), certain California statutes, and case law interpreting and applying those rules, will provide the method of determining which, if any, ambiguous or conflicting terms can be enforced.
Generally speaking, an ambiguous term can reasonably be read in more than one way. Likewise, a conflicting term exists where compliance with one or more contractual provisions would violate another contractual provision.
The California Legislature codified contract interpretation rules in the California Civil Code to cover a variety of circumstances that can arise with ambiguous or conflicting terms. A summary of a few of the most common principles follows below.
Contract Interpretation in General
- A contract must be interpreted to give effect to the mutual intention of the parties as they existed at the time of contracting, so far as such intentions are both ascertainable and lawful. Civil Code § 1636
- The whole of a contract should be taken together, so as to give effect to every part, if reasonably practicable, with each clause helping to interpret the other. Civil Code § 1641
- Several contracts relating to the same matters, between the same parties, and made as part or parts of substantially one transaction, are to be taken together. Civil Code § 1642
- A contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates. Civil Code § 1647
- No matter how broad a contract is, it extends only to those things the parties intended to contract. Civil Code § 1648
- Inconsistencies in a contract must be reconciled, if possible, by an interpretation that will give some effect to the inconsistent clauses, subordinate to the general intent and purpose of the whole contract. Civil Code § 1652
Interpreting Specific Contract Language
- Contract language should be understood in an ordinary and popular sense, not in its strict legal meaning. The exception to this is when parties use words meant to be taken in a technical sense. For example, construction contracts often use language that references published trade standards, which can be used to interpret the contract. Civil Code § 1644
- Technical words should be interpreted as usually understood by individuals in the profession or business to which they relate, unless clearly used in a different sense. Civil Code § 1645
- Contract words that are wholly inconsistent with a contract’s nature, or with the main intention of the parties, are to be rejected. Civil Code § 1653
If you have any questions about ambiguous or conflicting terms in a contract, consult with an experienced attorney. Ezer Williamson Law provides a wide range of both transactional and litigation services to individuals and businesses. We have successfully prosecuted and defended various types of business, real estate, construction and property claims. Contact us at (310) 277-7747 to see how we can help you with your business, real estate or construction law needs.