How to Know if You Need a Contract Interpretation

Contract interpretation is typically taken on when different parties cannot agree on what a term within their contract means. This will usually lead to them having to review the document in court and interpret the term in order to solve the dispute. It doesn’t necessarily seem like something you need a lawyer for, but you always want someone who will look out for your best interests. Especially if it comes down to a legal and binding document.

And these interpretations may be needed in a variety of different industries. For example, real estate disputes, including contracts between the renter and landlord. If the renter agrees to pay a fixed rent payment and then pay a higher amount after a year, they may have a disagreement. Does this new higher rent start in the first month of the following year? Does it start after a full year of living in the apartment? If they finished the application but moved in a few weeks later in a different month, does that alter this agreement? It may just be a simple misunderstanding, but by taking it to a judge and having them interpret it as a mediator, they can get a result and move forward accordingly.

These could also come up in commercial disputes
between businesses. When multiple parties work on a contract together, they are usually barred by some kind of guidelines. To counteract this, they may try to use vague words to give some flexibility in meeting arrangements within the document. However, this may lead to disputes and disagreements down the road if the parties interpreted these words differently. For example, if there is an agreement to meet a customer or partner’s needs “promptly”, how can they define that? That could mean within the week for one partner but within two or three business days for another. Is promptly defined by the urgency of the request, or is it the same amount of time regardless of what is needed?

Cases like these are important and must be fully resolved, even if both parties say that the contract is invalid. The FedArb Arbitrators take care of going over the contract interpretation and its underlying validity. This is why it’s so important to be specific and agree among all parties when you’re first creating a contract. Don’t agree to anything you don’t feel comfortable with and make sure you know exactly what you’re agreeing to beforehand.

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