Interpreting

What Does the Contract Mean. When you make a contract, you probably have a fixed idea s to its terms and meaning. This idea, this internal belief of its meaning, lawyers call your "subjective intent." If you had been asked at the time you made the deal, your subjective intent is your own belief as to the terms of the deal. When you promised your son a car in return for making straight A's, you may have been thinking about a used-car, maybe that old clunker that you'd been thinking of getting rid of anyway. That's your subjective intent, your own state of mind. At the time he accepted your offer, your son's own subjective intent may have been somewhat different. He perhaps envisioned a brand new fire-red Firebird--the one he showed you the other day.

In the first panel, we described the mirror image rule: the two parties must have a meeting of the minds. But in fact, that statement was misleading. The law of contracts doesn't really focus on the minds of the parties at all. It focuses on the objective meaning of what they said or did. When parties later argue about the meaning of their contract, in fact, the courts don't want to hear about what they were thinking, evidence of their state of mind is largely inadmissible to explain the meaning of the contract. Instead, the courts look to objective evidence of intent. In finding the meaning of a contract, lawyers and the courts ask "what would an ordinary person mean by those words or that contract. This objective test serves two purposes. First, it forces contracting parties to make their meaning plain: each party has a duty to be clear. If you have a secret intent or meaning, it will not form part of the contract. Second, it prevents parties from concocting a meaning after the fact, in the heat of a dispute. If you intended a brand-new firebird, son, you should have told me then when we agreed.

Finding the meaning. But what happens if the objective language used by the parties doesn't seem to answer the question about which they disagree. In our example, father didn't say "Red Firebird". Does that mean that any car will do. Here, the son claims that the parties intended a red firebird, because just a few days before, he had pointed out a red Firebird to his father. He claims that he reasonably understood his father's offer to contemplate the very red Firebird they had looked at. Surely, no reasonable person could have thought he was talking about the old family clunker.

Why not just solve this problem by finding that the parties did not have a meeting of the minds, so they have no contract. One way of solving disagreements about the contract of uncertain meaning would be to simply refuse to enforce them. This approach seems unfair to the son, however, because he after all has spent the year working diligently to make straight A's. The "dump the contract" solution would encourage parties to manufacture ambiguities in order to escape from a contract. So, ordinarily courts attempt to find meaning in a contract, even though ambiguous. The law supplies courts with a number of tried and true tools and rules with which to find that meaning. Here are some of them.

Rules of Interpretation:

Plain Meaning Rule. If the meaning of the language is plain, the Court will not look outside that plain meaning to vary the terms of the contract. Often parties to a contract will attempt to reinforce this rule by stating right in their contract that they don't want the court to look outside the contract by using an integration clause. The integration clause tells the courts that the parties don't want the negotiations and prior drafts to be considered, because the parties want to limit the evidence of their meaning to the contract. Sometimes, however, the negotiations and pre-contract correspondence can help find the meaning of the contract by explaining the parties' true intent. The partner to the plain meaning rule is the parol evidence rule, which prohibits the use of outside, or "parol" evidence to vary the plain meaning of the contract.

Course of Performance. Course of performance, what the parties actually did, can help discern their intent. If, after making their agreement, father and son repeatedly visited the new car lot and looked admiringly at the Firebird, wouldn't that reinforce son's claim that Father really did promise a Firebird. If the parties have a prior course of dealing, that too may help explain the contract. "But Dad, my older brother got a Firebird!!!

Other rules apply. We prefer a sensible, to an absurd meaning. We prefer a fair, to an unfair meaning. If two terms of the contract seem to contradict, we attempt to find a meaning which harmonizes the two meanings. If the two meanings cannot be harmonized, we look for the possibility that the parties intended one term to over-ride the other. Handwritten additions over-ride standard typewritten language. Special language targeted to a particular circumstance over-rides general language. We try to adopt a meanings which fulfill the purpose of the contract. If one party drafted the contract, we tend to construe ambiguities against the drafter, on the theory that he had an opportunity to make his meaning plain. We look also to trade practices in the particular industry.

Plain Language Law: Minnesota has a plain language law applicable to certain consumer contracts. Sections 325G.29 to 325G.36. It covers sales of personal property, security interests in personal property and residential leases not exceeding three years. The law exempts:

(1) a contract where the price, excluding interest or finance charges, is more than $50,000;
(2) a contract through which a consumer mortgages an interest in realty or obtains money or credit to be used to purchase or refinance an interest in realty;
(3) a contract in which the sale of personal property is merely incidental to the sale of an interest in realty;
4) a written agreement involving a transaction in securities with a broker-dealer or investment advisor registered with the Securities and Exchange Commission; or
(5) a transaction in commodities with a futures commission merchant registered with the Commodities Futures Trading Commission.

Under the statute, every consumer contract must be written in a clear and coherent manner using words with common and everyday meanings and mustl be appropriately divided and captioned by its various sections. The law contains the following exemptions:

Contracts subject to other federal or state readability laws applicable to the entire contract
Particular words, phrases, provisions or forms of agreement specifically required, recommended or endorsed by a state or federal statute, rule or regulation.

A consumer contract may include technical terms to describe the services or property which are the subject of the contract, if the terms are customarily used by consumers in connection with the services or property. The statute allows wronged consumers to bring private attorney general enforcement actions. It also allows a court construing a covered consumer contract to reform the contract or limit a provision so as to avoid an unfair result if it finds that:

(1) a material provision of the contract violates section 325G.31;
(2) the violation caused the consumer to be substantially confused about any of the rights, obligations or remedies of the contract; and
(3) the violation has caused or is likely to cause financial detriment to the consumer. If the court reforms or limits a provision of a consumer contract, the court shall also make orders necessary to avoid unjust enrichment.

But a consumer may not use the statute as an excuse to avoid payment, at least without judicial determination. The statute contains a detailed section regulating remedies.