While standardized contracts exist, these forms oftentimes may not be used or might be modified or added to without considering the impact of the change on the rest of the contract documents.
Similarly, the non-standardized provisions (such as scope of work on a particular project) may contain ambiguities which require courts to interpret the language used.
If a contract is clear and unambiguous, the contract will be enforced and the parties will be held to their bargain (even if one of the parties simply made a bad deal). However, when conflicts exist or contract ambiguities arise, courts are faced with having to interpret contract terms with the ultimate goal being to identify the intent of the parties and to respect that intent. To accomplish its goal, courts have developed several doctrines of contract interpretation.
As a general rule, courts will interpret ambiguous terms against the drafter of the contract. Courts will also favor the interpretation of the contract which gives meaning to the entire agreement, not just a particular provision on a standalone basis. Because construction contracts often include numerous separate documents and contracts incorporate by reference agreements of other parties, this doctrine has particular relevance. Specific contractual terms are also considered to be more reliable evidence of intent than general terms. Courts will also look to course of performance and evidence of prior dealings. This includes both prior dealings in entirely separate projects, as well as prior dealings over the course of performance on a single project. Courts will also rely on general custom and trade usage within the relevant industry when faced with a contract which requires judicial interpretation.
The above is just a sampling of the various tools and doctrines utilized by courts when trying to interpret unclear contract documents to make a determination on the ultimate intent of the parties. While it is impossible to avoid all conflicts and predict all future scenarios, it is wise for all parties to give appropriate attention and consideration to the contract documents at the time of formation.
This post was written by Josh Baker