Guide

Contract law in Europe

Interpretation of terms and words in European contracts

The Principles of European Contract Law are written as clearly as possible, so that they can be understood easily by both sides. Different language versions are available so that both parties know exactly what they are agreeing to, to ensure that they understand and accept the terms of the contract. However, there may be cases where the interpretation of words or terms in a contract could cause problems.

Chapter five of the Principles explains the basis on which the meaning of terms or words is to be agreed. In general, the underlying rules for interpretation are based on what is 'reasonable'. For example, the interpretation of a term or word is what both parties intended it to mean - even if that is different from the literal meaning.

If the sides cannot agree, then the term or word will be interpreted in the way that a suitably qualified 'reasonable person' would interpret it.