Theory Of Contract Interpretation And Rules

This paper takes historical method to tomb the basic ideas of the contract interpretation,and studies its logical structure as well as its value views.The paper compares the different pathes of the two legal systems'contract interpretation theory, at the same time gives a study on the inner meaning and usage of the interpretation rules.aiming at finding the possible balance point between contract freedom and contract justice in private law.The text provides the another angel of watching the relation between expressivism and private law's self-government in an effort to say something to the improvement of the contract interpretation system.Contract interpretation refers to the process in which the judge ascertains the contents of the given contract, the need for the interpretation lies in the ambiguity of the terms and diction employed in contract as well as the purpose of saving cost. As the interpretation is intended to clarify or define a certain legal conduct, it should abide by some principles and standards. On the object of contract interpretation, the continental system holds that it should be the extrinsic evidence that the party expressly states, while the common law states that the judge as a reasonable person is able to construe the meaning of the context and all the circumstances accompanying the transaction should also be taken into consideration. However, the two legal systems share the idea that contract interpretation should be based on mutual assent of the parties involved. The nature of contract interpretation is quite complicated which involves the judgments of both facts and values.The theory of declaration of will has experienced different phases in its development in which the objective approach (manifestation) had given to subjective approach (intention) before it made a comeback, The change of trend is an indicator of the tendency towards social justice. Most continental countries take up the manifestation theory with the intent theory as an exception.The core of interpretation is the construction of the real meaning (plain meaning) of the contract,the manifestation theory and intent theory offer their own solution with different perspectives.the subjective approach argues that under the rule of free will the intended meaning of the party making the manifestation should prevail. But the intended meaning is difficult to testify, which may be harmful to the reliance interest of the other party and injure the security of transaction. The objective standard states that the objective meaning of the manifestation should prevail.In the objective perspective, the other party could place his reasonable reliance on the identifiable contents. Protecting the reasonable reliance is within the realm of law. The normative meaning in objective theory refers to the meaning construed by a third party who is a reasonable man. In objective theory the understanding of the reasonable person is fundamental. This standards is established to achieve equity between the two parties in terms of interest and liability. To some extent it exercises restriction on the application of free will, but still in line with the principle. On the contrary, the reasonable third party is placed between freedom and justice.Making manifestation according to norm is the requirement for the reasonable third party. Making manifestation of intention is the conduct of social communication. The success of communication lies in the norm of manifestation. The performance of reasonable duty in communication determines which party should be held liable for the failure of the communication. The manifested intention is adopted for judging liability and this applies to both parties.As for interpretation principles, the grammatical approach is the first step, but any interpretation should not be limited to its literal meaning. Purpose approach is the guideline in defining the contents of a contract. The interpretation of contract should be done in the light of the purpose of the contract. The integration approach takes the contract as a whole. The usage of trade approach stresses it is in line with the interest and intention of the partiesinvolved when the usage of trade is adopted in contract interpretation. Duty of good faith requires that the judge should take the stand of the parties involved and perform duty of good faith in interpreting the contract. This principle helps to stop up the loopholes in contract. But this principle is adopted only after other approaches are ineffective. The order of rules of interpretation in application is worth examination which scholars have arrived at a common understanding. The interpretation theory of common law and its principles are distinctive in that after a dispute the objective standard has been prevailing over subjective standard since the end of the 19th century.Supplementary interpretation refers to the work done in stopping up the loopholes in the declaration of will by some interpretation methods. Supplementary interpretation requires the judge to ascertain the real meaning of the parties involved rather than making a contract in their places. That the interpretation of contract turns back on intent theory (intentivism) for manifestation theory (expressivism) results in no harm to the principle of free will. Free will does not mean the freedom with no restriction. The protection of reliance interest is a restriction on free will. In interpreting contract, the understanding of equality and justice by the judge will influence the process and the result of the interpretation. What the judge should do is to find the balance point of interests to achieve equity in law.