Interpretation

Parties

It is at times useful to specify the parties to a contract by way of a separate clause in order to eradicate doubt or confusion. This could be necessary where there are multiple parties or signatories, where joinder of parties is envisaged or where corporate or firm names need to be specified to comply with regulatory or court requirements.

See Parties.

Persons

Many commercial agreements employ the generic concept of “person” as a means of referring to any natural person or legal entity where the contract as a whole makes such a term convenient.

See Persons.

Gender, singular and plural

Many contracts make it clear that references to parties are gender neutral and that a reference to one gender includes the other. This avoids possible arguments that certain provisions apply to one party but not another based on gender.

A term is often inserted in commercial contracts to the effect that words denoting the singular include the plural (and vice versa). This is in order to render contracts easier to read without compromising their meaning. Sometimes, these matters are provided for jointly in one clause, although two separate clauses may be used.

See Gender, singular and plural.

Recitals

The purpose of recitals is to set out necessary factual background to the agreement. It may be appropriate to include these in a contract. Care should be taken to avoid imbuing the recitals with contractual or promissory intent.

See Recitals.

Time

The interpretation clauses usually state that any reference to time is a time in a certain time zone. Likewise there is usually a reference to what is “Business Hours” and what rule will apply if an obligation to perform occurs on a non-business day.

Reference to a “person” includes corporations, partnerships and unincorporated associations.

Defined terms

Long or complex contractual documents often provide for defined terms in order to avoid ambiguity and promote consistency of usage.

See Defined terms.

References to headings, clauses, schedules etc

Lengthy contracts often use headings to distinguish the content of different terms and clauses. This aids the reader and makes the contract more comprehensible. However, a disclaimer is often inserted to clarify that the heading will not determine interpretation of the content.

A standard boilerplate clause provides that references in the body of the contract to clauses, schedules etc are references to clauses, schedules and other component parts of the contract at hand. Although considered by some as unnecessary, this provides clarity and obviates the need to identify the contract on each occasion.

See References to headings, clauses, schedules etc.

General and particular terms

Many contracts specifically refer to what has been known as the ejusdem generis rule of interpretation. The rule states that where particular words are followed by general words, the general words are limited to the same kind or class as the particular words.

See General and particular terms.

Currency

The currency and its associated permitted symbols are usually stated for consistency in the interpretation clause.

Amendment and replacement of legislation

Where agreements refer to statutes or subordinate legislation, it is not uncommon for a clause to be inserted expressing how the parties intend the agreement to be affected. Where no express term is used, a reference to legislation will be presumed to be a reference to it as repealed or amended.

See Amendment and replacement of legislation.

Counterparts

If a contract is to be signed in counterparts, a clause is often inserted to clarify that each counterpart is deemed an original and that together they constitute one instrument.

See Counterparts.