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Rules For Interpreting Contracts In Georgia

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The Official Code of Georgia § 13-2-2 sets out “rules for interpretation of contracts generally.” The law states that the following rules, among others, shall be used in order to arrive at the truthful interpretation of a contract. This means if you are having a business dispute with your partner, vendor, tenant, or another company and a question turns on what the contract between you two actually means or whose version (yours or theirs) interprets the contract correctly, consider the following rules:

(1) Parol evidence is inadmissible to interpret the written contract.–Parol evidence is anything that is outside of the four written corners of the piece of paper that the contract is actually written on. This could mean conversations that you had over the telephone or notes written on a dinner napkin at a restaurant you were eating at during contract negotiations. The only time this outside evidence (“parol evidence”)should come in to interpret the meaning of the written contract is if it the written contract is somehow ambiguous (unclear) and it is obvious that the written contract wasn’t intended to represent the entire agreement.

(2) Words generally should be interpreted by their usual and common meaning; but a technical word used in particular trades should be interpreted the way they are generally used in that line of business. The local use of a word can be brought in as evidence to determine the actual meaning intended by the parties who entered the contract. In other words, if you and I were chicken farmers and we entered into a contract where you would sell me 500 Rock Cornish broilers, if there was any dispute as to what a “broiler” was, the courts would look to the ordinary local use of how Georgia chicken farmers interpret “broilers.”

So for example, the courts would not interpret “broilers” to mean a grill you’d set on the stove for broiling and assume that you and I were in the pots and pans business. Rather, they’d look at the language of the Georgia chicken farmer industry to interpret what a “Rock Cornish broiler” actually means.

(3) The custom of any trade or business is only binding only when it is such a universal practice that it justifies the interpretation of the contract. This speaks for itself. We would want to know that the custom and practice of chicken farmers in Georgia and as long as it is a “universal practice” we would be able to use it in order to interpret the contract.

(4) Additionally, when you interpret a contract you should interpret it in such a way that will uphold the entire meaning of the contract, not just a few parts here and there.

(5) If the meaning of the contract is at doubt, and you have to interpret it in such a way that favors one party over the other, you should interpret it against the party that actually drafted (wrote up) the contract. This is because you assume that the writers of the contract were at the biggest advantage and the party that did not write it is already at a disadvantage so you should interpret in their favor.

Consequently, if you are the party that is in charge of drafting the contract, you had absolutely be sure that you have good competent legal counsel drafting your legal document. If you don’t and you just throw something together that you cut and pasted off the internet, you are bound to run into trouble later on. Because you were the one who actually drafted the contract, the courts may disfavor your side if having to interpret the meaning of the contract in a business dispute.

Thus, always make sure the contract is drafted in such a way that protects your legal rights. We regularly represent clients involved in litigation disputes who often wish they had hired us much earlier so they might have avoided or prevented the litigation dispute in the first place.

What The Cardinal Rule Is For Interpreting Contracts:

Finally, we need to mention what the cardinal rule is for interpreting contracts as explained in the Official Code of Georgia Annotated § 13-2-3. The cardinal rule of interpreting the contracts is to ascertain (“figure out”) what was the intention of the parties entering into the contract. If that intention is clear, it doesn’t contradict a rule of law, and sufficient words (enough written descriptions) show what this intention is, then the “parties intent” is what the courts will enforce irrespective of all other technical or arbitrary rules.