Document-Id: 925000, Please cite as: "https://www.trans-lex.org/925000"
Title
IV.5.3 - Interpretation in favor of effectiveness of contract
Content
No. IV.5.3 - Interpretation in favour of effectiveness of contract
Where there is doubt about the meaning of a contract term, an interpretation should be preferred that makes the contract lawful or effective ("ut res magis valeat quam pereat"; "effet utile").
Commentary
1 This principle follows from the general principle of interpretation pursuant to which contract interpretation must always seek to determine the common intentions of the parties.
2 The assumption behind that Principle is that each contract is aimed at achieving the parties' common commercial objective. Therefore, contract interpretation of terms which convey different meanings and of which one renders the terms redundant or even absurd or the contract invalid, should always focus on that meaning of the contractual terminology which gives a certain effect to the words or validity to the contract as a whole. Another consequence of this rule is that in interpreting a contract, a solution should always be found that avoids the premature termination of the contract by one side, thus making the avoidance of the contract a remedy of last resort.
2 The assumption behind that Principle is that each contract is aimed at achieving the parties' common commercial objective. Therefore, contract interpretation of terms which convey different meanings and of which one renders the terms redundant or even absurd or the contract invalid, should always focus on that meaning of the contractual terminology which gives a certain effect to the words or validity to the contract as a whole. Another consequence of this rule is that in interpreting a contract, a solution should always be found that avoids the premature termination of the contract by one side, thus making the avoidance of the contract a remedy of last resort.
References
Arbitral Awards
Ad Hoc-Award of May 27, 1991, YCA 1992, at 11 et seq.Ad-Hoc-Award, Kuwait v. The American Independent Oil Company (AMINOIL), 21 ILM 976ICC Award No. 3243, Clunet 1982, at 968 et seq.ICC Award No. 3380, YCA 1982, at 116 et seq. (also published in: Clunet 1981, at 928 et seq.).ICC Award No. 3460, Clunet 1981, at 939 et seq.ICC Award No. 7920, YCA 1998, at 80 et seq.ICC Award No. 8331, 10 ICC Bull. No. 2, 1999, at 65 et seq. (also published in: Clunet 1998, 1041)ICC Award No. 8365, Clunet 1997, at 1078 et seq.ICC Award No.1434, Clunet 1976, at 978 et seq.ICSID Award, AMCO Asia Corp. et al. v. The Republic of Indonesia et al., YCA 1985, at 61 et seq.ICSID Award, Asian Agricultural Products Ltd. v. The Republic of Sri Lanka, YCA 1991, at 106 et seq.The Government of the State of Kuwait v. The American Independent Oil Company (AMINOIL), YCA 1984, at 71 et seq.Court Decisions
Acquisition of Polish Nationality, P.C.I.J. Ser. B, No. 7Antonio Mastrobuono and Diana G. Mastrobouno, Petitioners, v. Sherason Lehman Hutton, Inc. et al., 115 S.Ct. 1212 (1995)BGH NJW 1993, at 1925BGH NJW 1998, 2966BGH NJW 2005, 2618BGH NJW-RR 1990, at 817 et seq.BGH, NJW 1999, 3704British-American Insurance (Kenya) Ltd v Matelec Dal & Anor, [2013] EWHC 3278 (Comm) (29 October 2013)Energy Transport Ltd. v. M.V. San Sebastian, 348 F Suppl. 2d 186Enka Insaat Ve Sanayi AS v OOO Insurance Company Chubb, [2020] UKSC 38Interpretation of Peace Treaties, ICJ Rep. 1950, at 221 et seq.Shaw Group Inc. v Triplefine International Corporation, 322 F.3d 115.Svenska Petroleum Exploration AB (Schweden) vs. Government of the Republic of Lithuania & AB Geonafta (Lithuania), in: Yearbook Comm. Arb'n XXXI (2006), at 906 et seq.Zurich Insurance (Singapore) Pte Ltd v B-Gold Interior Design & Construction Pte Ltd [2008] 3 SLR 1029; [2008] SGCA 27Doctrine
Berger, Klaus Peter, The Creeping Codification of the Lex Mercatoria, The Hague, London, Boston 1999Berger, Klaus Peter, The Creeping Codification of the New Lex Mercatoriam 2nd. ed. 2010Black, Henry Campell, Black's Law Dictionary, 6th ed., St. Paul 1990Bonell, Michael Joachim, The UNIDROIT Initiative for the Progressive Codification of International Trade Law, 27 ICLQ 1978, at 413 et seq.Charles T. Kotuby Jr. / Luke A. Sobota, GENERAL PRINCIPLES OF LAW AND INTERNATIONAL DUE PROCESS - Principles and Norms Applicable in Transnational Disputes, New York NY USA 2017Craig, W. Laurence/ Park, William W./ Paulsson, Jan, International Chamber of Commerce Arbitration, 3rd ed., Dobbs Ferry 2000Dasser, Felix, Internationale Schiedsgerichte und Lex Mercatoria, Zürich 1989Derains, Yves, note to ICC Award No. 3243, Clunet 1982, at 970 et seq.Derains, Yves, note to ICC Award No. 3380, Clunet 1981, at 930 et seq.Derains, Yves, note to ICC Award No. 8331, Clunet 1998, at 1044 et seq.Domingo, Ortega, Rodriguez-Antolin, Zambrana, Principios de Derecho Global, Navarra, 2006Ferrari, Franco, The CISG's Interpretative Goals, Its Interpretative Method and Its General Principles in Case Law (Part II), IHR 5/2013, at 181 et seq.Fouchard Gaillard Goldman on International Commercial Arbitration (edited by Emmanuel Gaillard and John Savage) The Hague 1999Fouchard, Philippe, L'Arbitrage Commercial International, Paris 1965Hartkamp, Arthur, The UNIDROIT Principles for International Commercial Contracts and the New Dutch Civil Code, in: CJHB Brunner-Bundel, Deventer 1994, at 127 et seq.James, Philip, Introduction to English Law., 10th ed., London 1979Kahn, Philippe, L’interpretation des contrats internationaux, 108 Clunet 1981, at 5 et seq.Knütel, Rolf, Rechtseinheit in Europa und römisches Recht, 3 ZEuP 1994, at 244 et seq.Lewison, Kim, The Interpretation of Contracts, 2nd. Ed., London 1997Lowenfeld, Andreas F., Lex Mercatoria: An Arbitrator's View, Arb.Int’l 1990, at 133 et seq.Marrella, Fabrizio, La nuova lex mercatoria, Principi Unidroit ed usi di contratti des comercio internazionale, CEDAM, Tratto di dritto commerciale e di dritto publico dell‘economia, Volume 30, Padova 2003Maskow, Dietrich, Beispiel für allgemeine vertragsrechtliche Regeln, in: Ak.St.Rwiss.DDR (ed.), Grundzüge einer wissenschaftlichen Konzeption des allgemeinen Teils der rechtlichen Regelung internationaler Wirtschaftsbeziehungen zwischen den Organisationen der Mitgliedsländer des RGW, Potsdam-Babelsberg 1986, at 38 et seq.McMeel, Gerard, The Contruction of Contracts - Interpretation, Implication, and Rechtification, 2nd Ed., 2011Mustill, Michael, The New Lex Mercatoria: The First Twenty-five Years, Arb.Int'l 1988, at 86 et seq.Noy, William, A Treatise of the Principal Grounds and Maxims with an Analysis of the Laws of England, 1821Paulsson, Jan, La Lex Mercatoria dans l‘Arbitrage C.C.I, Rev.d.Arb. 1990. at 55 et seq.Schmitthoff, Clive, International Trade Usages, Institute of International Business Law And Practice Newsletter, Special Issue, ICC Publ.440,4, Paris 1987Yildrim, Ahmet Cernil, Interpretation of Contracts in Comparative and Uniform Law, 2019Model Laws
Code Européen des Contrats - European Contract CodeFranco-Italian Obligation LawPrinciples of Latin American Contract Law (PLACL)The Draft Civil Code for Israel in: Siehr, Kurt/Zimmermann, Reinhard (ed.) The Draft Civil Code for Israel in comparative perspective, 2008National Legislation
Civil Code Québec 1991Czechoslovak International Trade CodeEthiopian Civil CodeFrench Civil Code 2016French Code Civil 1804GIW GDRIndonesian Civil Code (excerpts)Italian Codice CivileLouisiana Civil Code 2015Philippines Republic Act 386 (Civil Code)Spanish Código CivilPrinciples / Restatements
OHADAC principles on international commercial contractsPrinciples of European Contract Law - PECLUNIDROIT Principles of International Commercial Contracts 2016Contract Clauses
1. Interpretation ClauseEmployment ContractJurisdiction and SeverabilityAll provisions of the Plan and Trust shall be so construed as to render them valid and enforceable in accordance with their intent.
2000