Ch. 8 - Interpreting & Drafting Contracts

Question 1

Interpretation legal principles

Answer 1

1) overriding principle of the objective intention of the parties
2) the canons of contract construction
3) the introduction of additional evidence

Question 2

Intention of the Parties

Answer 2

courts apply objective standard, which requires determining what hypothetical reasonable parties would have intended. Can use canons of contract construction and the contractual context as guidelines

Question 3

Canons of Contract Construction

Answer 3

1) plain and ordinary meaning - the golden rule
2) special meaning if required
3) Reading the contract as a whole
4) Giving effect to all parts of a contract - don’t read one part in a way that makes another redundant
5) restriction by express provisions - special conditions trump general provisions
6) Commercial Purpose - presume parties dud not intend an unreasonable result
7) Read words in context
8) Contra Proferentem

Question 4

Contra Proferentem

Answer 4

where a contract is ambiguous and alternate interpretations, the courts choose the interpretation that favors the party that did NOT write the contract.

Question 5

Additional Evidence

Answer 5

contract is primary evidence, may use additional evidence were ambiguous. If the original contract is clear and unambiguous, parol evidence rule applies.

Question 6

Parol Evidence Rule

Answer 6

if a contract is entirely written and is clear and unambiguous, additional evidence is not admissible to add, vary, or contradict the written words.

Question 7

Drafting contracts principles

Answer 7

1) contract should reflect the business arrangement between parties
2) providing guidance to the parties in resolving future disputes by accurately defining and allocating risks and obligations, and dealing with foreseeable issues
3) providing proper protections and incentives for each party

Question 8

Best and worst type of contracts

Answer 8

Best: the contract negotiated on a detailed level between the parties, and the written contract accurately represents their mutual intention

Worst: the contract is entirely oral

Question 9

Rules of thumb when drafting contracts

Answer 9

1) carefully consider fundamental elements of the contract
2) assume problems will occur with the first contract
3) use clear, concise, unambiguous language