6

Interpretation of Contracts

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A. Introduction 91
B. Intention and Expression: the Two Theories 91
C. Objective Interpretation 93
D. Maxims of Interpretation 98
E. Forms of Constructive Interpretation 100
I. Implication of terms by default rules 102
II. Constructive interpretation 103
III. Collateral duties 106

A. Introduction
Words are not always understood as intended. The meaning of a verbal statement
depends essentially on what the parties speaking and listening think it means, but
since what people think depends on their personal knowledge, experience, prefer-
ences, concerns, and interests, a statement often means different things to the speaker
and the listener. Literature and many other humanities often have to engage with
the fact that readers of a given text (a poem, a novel, or a philosophical treatise) may
understand it in ways unintended by the author, or that readers at different times and
places may interpret the same text in different ways. Lawyers must also tackle this
issue, but face the extra difficulty that their texts—​be they statutes affecting every-
one or contracts engendering rights and duties for the parties alone—​create a binding
order from which legal consequences may flow. Thus lawyers must seek to give the
text a single meaning, one which will be the same for all those affected. The process of
educing such a meaning is called construction, interpretation, or Auslegung.1

B. Intention and Expression: the Two Theories

Interpretation is required if contracting parties agree on what they said or wrote, but
differ as to what it means. There are two possible, but contrary, starting points. The

1 See C-​W Canaris and HC Grigoleit, ‘Interpretation of Contracts’ in A Hartkamp et al. (eds), Towards
a European Civil Code (4th edn, 2011) 587; S Ferreri, ‘The Interpretation of Contracts from a European
Perspective’ in R Schulze (ed), Informationspflichten und Vertragsschluss im Acquis communautaire (2003)
117; N Kornet, Contract Interpretation and Gap Filling (2006); JH Herbots, ‘Interpretation of Contracts’
in JM Smits (ed), Elgar Encyclopedia of Comparative Law (2006) 325; S Vogenauer, ‘Interpretation of
Contract’ in Max Planck Enc. 973; S Vogenauer, ‘Interpretation of Contracts: Concluding Comparative
Observations’ in A Burrows and E Peel (eds), Contract Terms (2007) 123; R Zimmermann, ‘Die Auslegung
von Verträgen: Textstufen transnationaler Modellregelungen’ in T Lobinger (ed), Festschrift für E Picker
(2010) 1353.

European Contract Law. Second Edition. Hein Kötz, Oxford University Press (2017). © Hein Kötz 2017
DOI: 10.1093/oso/9780198800040.003.0006
92 Interpretation of Contracts

first is that precedence is given to the intention of the parties, which is consistent with
the principle of party autonomy that legal obligations arise from, and are justified by,
the free will of the individual. As Savigny said, ‘We must regard the intention as the
only important and effective thing, even if, being internal and invisible, we need some
sign by which to recognise it.’2 The other view gives precedence to that sign, the exter-
nal fact of the expression, because social and commercial interaction requires that
reliance be protected, and reliance is placed on what others actually say, not on what

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they meant to say.
Even in ancient Roman law, interpretation hovered between these two poles.
Originally, when specific procedures or particular words or phrases were required in
order to create legal obligations, interpretation turned on the external phenomena,
since obviously the legal effect resulted from the actions, words, or phrases and not
from the intentions of the person doing or saying them: cum in verbis nulla ambigui-
tas est, non debet admitti voluntatis quaestio.3 Gradually, however, intention began
to take on greater importance, and another maxim of interpretation was adopted: In
conventionibus contrahentium voluntatem potius quam verba spectari placuit.4 In the
later Empire, under the influence of Greek moral philosophy and Christian doctrines
of virtue, interpretation which hewed to the external phenomena increasingly lost
ground until it was not so much the verba as the voluntas that counted. This ‘subjec-
tive’ method of interpretation held sway in the sixth century ad when, on Justinian’s
orders, excerpts from the classical jurists were collected as the basis of the intended
codification of Roman law. Scholars believe that many of the texts so preserved were
‘interpolated’ or altered so as to reflect the newer—​and supposedly more progressive—​
‘subjective’ doctrine.5
This tension between more subjective and more objective interpretations—​the
‘intention theory’ and the ‘expression theory’, as they came to be called—​runs through
the whole of European legal history. Subjective interpretation dominated legal litera-
ture until the late nineteenth century, though whether it was equally dominant in
practice is less certain. It figures in the French Code civil (art. 1156: On doit dans
les conventions rechercher quelle a été la commune intention des parties contractantes,
plutôt que de s’arrêter au sens littéral des termes), and most of the European civil codes
have followed suit: § 133 BGB, for example, provides that in interpreting an expression
of intention ‘it is necessary to ascertain the true intention rather than adhering to the
literal meaning of the declaration’. However, these provisions are often complemented
by another rule which looks more to the ‘objective’ meaning of the expression, and a
discrepancy ensues which it falls to the judge to resolve in the individual case. Thus,
alongside § 133 BGB we find § 157, which provides that contracts are to be interpreted
‘as required by good faith, taking customary practice into consideration’. The Austrian
ABGB even puts both canons of interpretation into a single provision, § 914: while
‘one is not to cleave to the literal sense of the expression, but to ascertain the intention

2 FC von Savigny, System des heutigen römischen Rechts (1840) iii, 258. 3 Paul, D.32.25.1.
4 Papinian, D.50.16.219.
5 The position is very clearly set out in R Zimmermann, The Law of Obligations, Roman Foundations
of the Civilian Tradition (1990) 621ff.
 Objective Interpretation 93

of the parties’, nevertheless the contract is ‘to be understood compatibly with decent
business practice’.
If parties choose to use words in a distinctive sense, different from their usual
meaning, everyone agrees that it is their intention rather than their expression that
counts: falsa demonstratio non nocet.6 Thus, if buyer and seller both use the word
Haakjöringsköd to signify ‘whale meat’ when it properly denotes ‘shark meat’, the
contract is for whale meat, and if the seller tenders shark meat the buyer can claim

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damages for non-​performance.7 The same applies to contracts for the sale of land that
specify the wrong plot of land.8 Here the Common Law respects the intention of the
parties, but not on the basis of an interpretation of the contract. If what appears in the
document differs from what the parties agreed on, ‘rectification’ of the written con-
tract may be sought if a party can show a ‘continuing common intention’—​consensus
ad idem.9 The same also applies if the true intention of one party differs from the
wording of the contract, and the other party has recognised this ‘unilateral mistake’
by the other party but still concludes the contract.10 The same solution can be found
in art. 8 CISG, where interpretation of a party’s statements, including any statements
made for the purposes of concluding the contract, should be made according to that
party’s intention ‘where the other party knew or could not have been unaware what
that intent was’. The approach in art. 5:101 PECL is the same: contracts are to be inter-
preted ‘according to the common intention of the parties even if this differs from the
literal meaning of the words’. This also applies even if only one party gives the wording
of the contract a particular meaning, provided that it can be shown that ‘at the time
of the conclusion of the contract the other party could not have been unaware of the
first party’s intention’.11

C. Objective Interpretation
Cases where the contracting parties were really in agreement but expressed themselves
in an inaccurate or muddled manner do not often come before the courts, because in
such cases both parties normally do what they intended. Disputes are much more
common when the parties attach different meanings to the agreed form of words, with
the difference of opinion arising either at the time of the negotiations (where the par-
ties did not realise that the difference of opinion existed or hoped that it would not
matter) or later, when something occurs which makes them reflect on the proper scope
of their apparent agreement. How should such disputes be resolved?
In cases like this, it is clearly futile to look for the ‘common intention’ of the par-
ties, at any rate if by that we mean an actual historical fact. Nor can one simply adopt

6 This is laid down expressly in art. 1281(2) Spanish Civil Code and art. 236(2) Portuguese Civil Code.
7 RG 8 June 1920, RGZ 99, 147. 8 BGH 25 Mar. 1983, BGHZ 87, 150.
9 See Craddock v. Hunt [1923] 2 Ch. 136 (CA) and generally on rectification, see GH Treitel, The Law
of Contract (13th edn, by E Peel, 2011) no. 8-​059ff.
10 See Treitel (n 9) no. 8-​067ff. Also under German law: see, for example, BGH 20 Nov. 1992, [1993]
NJW-​R R 373.
11 As in art. 5:101 PECL. Also art. 4.2(1) PICC; art. 34(2) CEC; art. II-​8:101(2) DCFR; art. 58(2) CESL.
Also BGH 20 Nov. 1992, [1993] NJW-​R R 373.
94 Interpretation of Contracts

the meaning that one or other of the parties gave to the words used, either then or
later. What counts is rather the meaning that would be given to the words by a rea-
sonable person, supposing him to be in the situation of the addressee and to under-
stand the words used in the context of all the other relevant circumstances of which he
could have been aware. This is generally agreed, and it is the formula used in the UN
Convention on Contracts for the International Sale of Goods. In art. 8(1) statements
made by a party ‘are to be interpreted according to his intent where the other party

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knew or could not have been unaware what that intent was’. If, as usually happens, this
provides no solution, statements are to be interpreted ‘according to the understand-
ing that a reasonable person of the same kind as the other party would have had in
the same circumstances’ (art. 8(2)). In making this determination, ‘due consideration
is to be given to all relevant circumstances of the case including the negotiations, any
practices which the parties have established between themselves, usages and any sub-
sequent conduct of the parties’ (art. 8(3)).
Thus, if a businessman in the export business gives a ‘demand guarantee’ of the
price payable for exported goods, he must pay immediately upon demand by the seller,
for that is how the phrase is understood in foreign trade. The guarantor can raise
defences to the claim only in a subsequent action for restitution, even if he did not
realise the technical meaning of the clause. But a guarantee given in respect of an eve-
ryday loan by the borrower’s wife who has no business experience will be construed
as a simple guarantee, subject to all the defences the borrower himself could raise. The
guarantor would regard her promise as a simple guarantee and so, in all the circum-
stances, would the reasonable lender.12
Rules like this are recognised everywhere, often in statutory form. Regard must be
had to ‘good commercial practice’, ‘the mandates of good faith’,13 and ‘well-​regarded
business usage’14 International rules also contain long descriptions of such circum-
stances to be taken into account in interpretation of contracts, most of which are simi-
lar in form. These include: the nature and purpose of the contract; the interpretation of
the parties with respect to previous contracts they have concluded; the pre-​contractual
negotiations between the parties; and also their behaviour after the contract has been
concluded, where such behaviour throws light on the issue in dispute.15
English law has long reflected the view that the interpretation of a written con-
tract turns on the meaning that a reasonable person would give to the same terms
and conditions as the contract under consideration: ‘Interpretation is the ascertain-
ment of the meaning which the document would convey to a reasonable person hav-
ing all the background knowledge which would reasonably have been available to the
parties in the situation in which they were at the same of the contract.’16 As well as
the ‘background’ that a reasonable person must take into account in order to inter-
pret a contract correctly, other aspects include the purpose that the parties attach to
the transaction, the actual circumstances under which the contract was concluded,

12 BGH 12 Mar. 1992, [1992] NJW 1446. 13 § 157 BGB; art. 1366 Codice civile.
14 § 914 ABGB. 15 See art. 5:102 PECL; art. 4.3 PICC; art. II.-​8:102(1) DCFR; art. 59 CESL.
16 Investors Compensation Scheme Ltd. v. West Bromwich Building Society [1998] 1 WLR 896, 912–​3
(Lord Hoffmann).
 Objective Interpretation 95

customary business practices, and ‘absolutely anything which would have affected the
way in which the language of the document would have been understood by a rea-
sonable man’.17 One could draw the conclusion that English law also takes account
of all ‘relevant circumstances’ in interpreting a contract, such as those set out in art.
8(3) CISG and (in even greater detail) in art. 5:102 PECL. But that is not the case. As
Lord Hoffmann clarified in a later decision by the House of Lords, ‘absolutely any-
thing’ does not include evidence from pre-​contractual negotiations between the par-

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ties being used to interpret the contract.18 This is based on the idea that statements
made by parties in negotiations often carry one-​sided expectations, are only meant
to be subject to contract, and will later be replaced by the mandatory wording of the
contract itself. This is undoubtedly correct, but must not lead to the position that pre-​
contractual negotiations are completely excluded as a means of interpreting the con-
tract. Instead, it should mean that judges must regard their evidentiary value with the
necessary reservation.19
What if the interpretation of a written contract on the basis of the rules stated here
leads to a particular result, but one party claims that another agreement was reached
prior to or upon conclusion of the contract that gives the contract another meaning
that the (correct) interpretation of the contract as it stands? Can that party support
the claim with documents or witnesses? Must the court examine these documents or
hear the witnesses? Continental legal systems would allow such examination of hear-
ings, even if it is difficult to dispute the presumption that the written contract is com-
plete and correct. In France, hearing witnesses may already be precluded by art. 1359
(formerly art. 1341) Code civil.20 Under the Common Law, it is presumed that legal
certainty in business transactions is paramount so ‘that parties who have reduced a
contract to writing [are] bound by that writing and that writing alone’. Thus the parol
evidence rule states that a written contract cannot normally be contradicted by evi-
dence of a prior contract. Admittedly, the Common Law recognises that the parol evi-
dence rule is not always just, and has been held to be inapplicable in so many cases that
the Law Commission has recommended abolition of the principle. Today, it is ‘highly

17 Lord Hoffmann in Investors Compensation Scheme (n 16) 913.

18 Chartbrook Ltd. v. Persimmon Houses Ltd. [2009] 3 WLR 267. Reliance on post-​contractual behav-
iour of the parties is also not allowed for the purposes of interpretation. Justification for this rule was
given in Whitworth Street Estates Ltd. v. James Miller & Partners [1970] AC 583 on the basis that, if a
different decision were made, ‘one might have the result that a contract meant one thing the day it was
signed, but by reason of subsequent events meant something different a month or a year later’ (Lord Reid
at p. 603). Similarly in L. Schuler v. Wickman Machine Tool Sales Ltd. [1974] AC 235. But contrast art.
5:102(b) PECL; art. 4.3(c) PICC; art. 59(b) CESL; and art. 8(3) CISG. German law also takes a different
approach. See, for example, BGH 7 Dec. 2006, [2007] NJW-​R R 529, where there is correct clarification
that assertions concerning post-​contractual behaviour of a party may only be decisive for the purposes
of interpretation if it turns out that the mutual intention of the parties was already in that direction when
the contract was concluded.
19 See also E McKendrick, ‘The Interpretation of Contracts: Lord Hoffmann’s Restatement’ in
S Worthington (ed), Commercial Law and Commercial Practice (2003) 139, 155f. See also H Kötz,
‘Vorvertragliche Verhandlungen und ihre Bedeutung für die Vertragsauslegung’ (2013) 21 ZEuP 777.
Furthermore, Lord Hoffmann raised the fear that litigation costs before courts and arbitration tribunals
would increase significantly if pre-​contractual negotiations could be taken into account in interpreta-
tion; on this, see also Kötz, ibid., 783ff.
20 See pp. 78f.
96 Interpretation of Contracts

unlikely that the parol evidence rule will preclude a party from leading evidence on
terms which were intended to be part of the contract’.21
These rules are not inconsistent with the assertion in many legal systems, and also
in art. 5:101 PECL, that the aim is to find the ‘common intention’ of the parties. In
France, courts and academics agree in saying that interpretation seeks the commune
intention des parties contractantes. This is also the starting point in art. 1188(1) Code
civil (as recently amended). However, when in fact no such common intention can

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be found, art. 1188(2) now expressly provides that the contract is to be interpreted
‘selon le sens que lui donnerait une personne raisonnable placée dans la même situation’.
Some help may also be given by art. 1194 Code civil, under which a contractor must
not only do what has been expressly undertaken, but also what is required in contracts
of that type by ‘l’équité, l’usage et la loi’. In practice, of course, a judge will hardly ever
be able to discern any real historical intention of the parties, and will inevitably have
regard to ‘objective’ considerations—​to ask how, in the light of all the circumstances,
a reasonable person would and should normally understand what was stated. This is
so even if the court may sometimes say, perhaps with tongue in cheek, that its inter-
pretation is based on nothing else but the commune intention des parties contractantes.
If it is not possible to determine a common intention of the parties, which is nor-
mally the case, interpretation of the contract turns on the meaning that ‘reasonable
persons of the same kind as the parties would give to it in the same circumstances’
(art. 5:101 PECL), not only if the contract term could be interpreted in more than one
way but also when its meaning seems ‘clear and unequivocal’. It is true that some older
judicial decisions refuse to consider an alternative interpretation ‘if the wording of the
document is entirely clear and unequivocal and there is no doubt about the sense of the
wording as stated’.22 The Cour de cassation also refuses to review the construction of a
contract, treating it as a matter of fact to be decided by lower courts. But where there
is a ‘clause claire et précise’, the Cour de cassation will quash decisions of lower courts
which have given it any meaning other than its objective one, even on the ground of a
supposed common intention of the parties.23 This has now been laid down in the new
provision of art. 1192 Code civil, under which clauses claires et précises must not be
distorted by interpretation. However, the question of whether or not a clause is really
‘clear’ turns not only on the wording, but also on the purpose of the contract and the
circumstances under which it was concluded. Thus the clause claire et précise rule only
clarifies that the Cour de cassation is entitled to overturn a decision if it determines
that there has been a particularly grave mistaken interpretation.24 Nevertheless, the

21 See McKendrick (n 19) 185. See also Treitel (n 9) no. 6:012ff; Vogenauer (n 1) 135ff. The international
sets of rules do not contain provisions equivalent to the parol evidence rule. The situation is different if
the written contract contains a Parteivereinbarung or merger clause that expressly states that the contract
is ‘complete’. In such circumstances, evidence of additional verbal or written agreements or statements
may only be used in support of interpretation of the written contract, but not as proof of an amend-
ment of supplementary agreement. See in detail art. 2:105 PECL; art. 2.1.17 PICC; art. II.-​4:104 DCFR;
art. 72 CESL and O Meyer, ‘Die privatautonome Abbedingung der vorvertraglichen Abreden’ (2008) 72
RabelsZ 562.
22 RG 28 Oct. 1911, [1912] JW 69; also RG 8 Nov. 1918, [1919] JW 102, 103.
23 Civ. 15 Apr. 1872, D.P. 1872.1.176; Civ. 14 Dez. 1942, D. 1944.112, n. P Lerebours-​Pigeonnière.
24 See F Terré, P Simler, and Y Lequette, Droit civil, Les obligations (11th edn, 2013) no. 459; Vogenauer
(n 1) 132ff.
 Objective Interpretation 97

rule remains that construction of a written contract is to be determined on the basis

of the wording of the document. German law has developed a formula that recog-
nises a ‘presumption that the written document is complete and correct’ if ‘the word-
ing and content of the written document express a specific business content, taking
into account customary business practices’. This presumption is, however, rebuttable.
Anyone arguing to their own advantage that the contract indicates a different con-
tent may rely on ‘means of interpretation external to the document’ by providing evi-

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dence (and this is not easy from a practical standpoint) that exceptionally the parties
intended a different meaning than recorded in their contract.25 Newer English cases
also follow this line, that the wording chosen in the formal document should be given
its common meaning, based on the
common sense proposition that we do not easily accept that people have made lin-
guistic mistakes, particularly in formal documents. On the other hand, if one would
nevertheless conclude from the background that something must have gone wrong
with the language, the law does not require judges to attribute to the parties an inten-
tion which they plainly could not have had.26
To sum up: in days gone by, and more on the Continent than in England, the conflict
in the interpretation of contracts between the ‘intention theory’ and the ‘expression
theory’ may have had some significance, but it hardly matters at all today. Admittedly,
a contract does not come about if the parties did not intend to bind themselves, but an
intention has to be expressed and intimated to the other party, or it has no effect at all.
Every statement is thus an act of social communication for which the person making
it must take responsibility, in the realisation that the other party will rely on what he
takes the statement to mean, and will accept the apparent offer and proceed to carry
out the contract or make other arrangements on that basis. That is why anyone mak-
ing a statement must reckon with the meaning which, in all the circumstances of the
case, would be accorded to it by a reasonable man in the position of the addressee. One
starts with the meaning that the words would have in everyday speech, and then asks
whether there were any special circumstances which would suggest to the reasonable
man that the statement was meant in an unusual sense. If the parties are both in the
same line of business, they must reasonably expect their statements to be understood
as they normally are in that commercial context. This is especially important when the
terms to be interpreted are standard terms used in numerous other contracts or stand-
ardised documents such as bills of lading, or bills, or promissory notes which may get
into the hands of third parties. Reasonable reliance on such documents should not be
frustrated by interpretation.

25 See, for example, BGH 31 May 1995, [1995] NJW 3258; BGH 5 Feb. 1999, [1999] NJW 1702; BGH 11
Sept. 2000, [2001] NJW 144; BGH 7 Feb. 2002, BGHZ 150, 32, 37ff. Swiss law takes the same approach: see
BG 5 July 2001, BGE 127 III 444, 445.
26 Lord Hoffmann in Investors Compensation Scheme (n 16) 913. This case concerned a contractual
provision that, contrary to its clear wording, was interpreted in such a way to accommodate the reason-
able intention of the parties. Similarly in Mannai Investment Co. v. Eagle Star Life Assurance Co. [1997]
AC 749: Here the notice of termination from a tenant, which would have been invalid based on its exact
wording, was interpreted in such a way that a reasonable person would have interpreted the position of
the landlord and was thus found to be valid. See also Treitel (n 9) no. 6-​011.
98 Interpretation of Contracts

It occasionally happens that a clause is utterly ambiguous in the sense that, despite
best efforts at interpretation, no single meaning can be given to it, since a reasonable
man would find either of two meanings equally plausible. If such a clause relates to
an essential point of the transaction, the contract fails for want of agreement. This
situation is rare. Take the case where the price of goods is agreed in ‘francs’. Even if
the buyer was thinking in French francs while the seller had Swiss francs in mind, it
will normally be possible to establish whether—​in the light of all the relevant circum-

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stances (place of contracting, or location of bank where payment to be made)—​a rea-
sonable person would regard the contract as being for French or Swiss francs. But the
English case of Raffles v. Wichelhaus27 may be a true instance of lack of agreement.
The plaintiff had sold the defendant 125 bales of cotton ‘to arrive ex Peerless from
Bombay’, and tendered cotton which arrived in Liverpool in December on a vessel of
that name. The defendant refused to accept the goods, and when the seller claimed
damages, offered witness evidence that he had in mind a quite different vessel—​a lso
called Peerless—​which had sailed from Bombay earlier and arrived in Liverpool in
October. The court held that this would be a good defence and would have allowed the
witness evidence. The case never came to trial on the actual facts, but if one accepts
that in the light of the evidence the reasonable observer would have been unable to
determine which of the vessels the parties had agreed on, it would be right to hold that
no contract had come about.28

D. Maxims of Interpretation
All legal systems provide judges with maxims or rules of thumb to help them inter-
pret contracts. But they are not really of much practical use, as they generally only say
what the judge’s common sense would tell him anyway. That is why the draftsmen of
the German Civil Code declined to include any such ‘rules of reason without any posi-
tive legal content’: it was not part of the legislature’s task ‘to teach the judges practical
logic’.29 Yet in some civil codes, one finds many such maxims of construction, all of
which were known to ancient Roman law and to the ius commune.30 We are told, for
example, that one should prefer a reading of a clause which gives it some effect rather
than none.31 If a clause is ambiguous, one is to adopt the meaning which is more

27 159 Eng.Rep. 375 (1864). On this case, see AWB Simpson, ‘Contracts for Cotton to Arrive: The Case
of the Two Ships Peerless’ (1989) 11 Cardozo LR 287, and AWB Simpson, Leading Cases in the Common
Law (1995) 135, where he gives full details of the legal and factual background.
28 See GS Cheshire, CHS Fifoot, and MP Furmston, Law of Contract (16th edn, 2012) 317f; Treitel (n 9)
no. 8-​042. It is different if a consensus can be established under general rules of interpretation and the
question arises whether one party can void the contract on the basis of a mistake. See below, pp. 180ff.
29 B Mugdan (ed), Materialien zum BGB I (1899) i, 436. 30 See Zimmermann (n 5) 637f.
31 Article 1191 Code civil; art. 1367 Codice civile; art. 1284 Spanish Civil Code; Ulpian, D. 45.1.80:
‘Quotiens in stipulationibus ambigua oratio est, commodissimum est id accipi quo res, qua de agitur, in
tuto sit.’ English law is to the same effect: see Langston v. Langston 6 Eng.Rep. 1128, 1147 (1834), per
Lord Brougham: ‘There are two modes of reading an instrument: where the one destroys and the other
preserves, it is the rule of law, and of equity, . . . that you should lean towards the construction which pre-
serves, than towards that which destroys. Ut res magis valeat quam pereat is a rule of common law and
common sense.’ Similarly, art. 5:106 PECL; art. II.-​8:106 DCFR; art. 40 CEC; art. 63 CESL.
 Maxims of Interpretation 99

convenient to the real matter of the contract32 or the sense which would be attributed
to it in the place where the contract was drawn up.33 Where an expression is indefinite,
its scope should be narrowed so as to cover only what the parties really intended,34 and
individual clauses must be construed in the light of the contract as a whole,35 and so
on. In actuality, such maxims—​which Carbonnier describes as constituting a ‘primer
for simpletons’ (guide-​âne)36—​play little part in court practice. Indeed, the Cour de
cassation decided at an early stage that it would not quash a decision just because the

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lower court had ignored one of these rules.37 One rather has the impression that judges
only cite those maxims of interpretation which support a conclusion already reached
on quite different grounds.38 It therefore seems logical that the elaborate maxims of
interpretation of the earlier version of the Code civil received short shrift in the recent
reform.39
The rules of interpretation so far discussed are designed to elicit the meaning which
a reasonable man would accord to a contract term whose meaning is unclear. Other
rules have a different function. They represent a legal value judgement and seek to pro-
mote the meaning most consonant with that value judgement. Thus the Code civil pro-
vides that in case of doubt words in an individually negotiated contract—​in a ‘contrat
de gré à gré’—​should be construed against the creditor and in favour of the debtor (art.
1190) and that a contract of sale should be construed against the seller and in favour of
the buyer (art. 1602(2)). These rules may reflect the widespread, but inaccurate, belief
that creditors and sellers are always rich and powerful, and that debtors and buyers are
always weak and poor and in need of protection. To that extent they are unpersuasive,
but they make good sense where the creditor or seller actually drafted the clause in
issue. So it was in ancient Rome, where these rules were first adopted.40 It may also be
the case today that sellers and creditors draft the terms of contracts more often than
buyers or debtors, but there are many instances where it is otherwise. Nowadays, the
rule is reduced to its proper scope: an unclear contract term is to be construed against
the party who did the drafting and could have done it better. It is right that the risk of
ambiguity in a contract clause should be borne by the party who could more cheaply

32 Article 1369 Codice civile; art. 1286 Spanish Civil Code; Julian, D. 50.17.67: ‘Quotiens idem sermo
duas sententias exprimit, ea potissimum excipiatur, quae rei gerendae aptior sit.’
33 Article 1368 Codice civile; Ulpian, D. 50.17.34: ‘Semper in stipulationibus et in ceteris contractibus id
sequimur . . . quod in regione in qua actum est frequentatur.’
34 Article 1364 Codice civile; art. 1283 Spanish Civil Code.
35 Article 1363 Codice civile; art. 1285 Spanish Civil Code. To the same effect is Chamber Colliery Co.
v. Twyerould [1915] 1 Ch. 268, 272, per Lord Watson. See also art. 5:105 PECL; art. 4.4 PICC; art. 60 CESL.
36 J Carbonnier, Droit civil: Les obligations (22nd edn, 2000) no. 68.
37 See, for example, Com. 19 Jan. 1981, Bull.cass. 1981.I no. 34.
38 See R Megarry, ‘Book Review’ (1945) 61 LQR 102: ‘The cynical truth about interpretation in England
seems to be that the Bench has been provided with some dozens of “principles” from which a judicious
selection can be made to achieve substantial justice in each individual case. From time to time, all the
relevant principles point in the same direction and leave the Court no choice. But in most of the cases
susceptible of any real dispute, the function of counsel is merely to provide sufficient material for the
Court to perform its task of selection.’
39 Compare the old arts. 1158–​1163 with what the Code civil now has to say on the interpretation of
contracts in arts. 1188–​1192.
40 For the details, see Zimmermann (n 5) 639ff.
100 Interpretation of Contracts

avoid it, and that is usually the party who selected or drafted the clause rather than the
party to whom it was presented.
This contra proferentem rule for ambiguous clauses can only be applied when it is
clear that a party formulated the clause in question, or played a major role in its for-
mulation. This is obvious enough when general conditions of business are used. The
Council Directive on Unfair Terms in Consumer Contracts states that where there is
doubt about the meaning of general terms and conditions, ‘the interpretation most

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favourable to the consumer shall prevail’.41 In some legal systems, the contra prefer-
entem rule is used not only for the protection of consumers, but of any party,42 and
sometimes it is even used in cases where the unclear clause does not form part of a
standard contract, but has been individually negotiated. The international sets of rules
that have been drafted also take different positions on this. Article 4.6 PICC says the
contra proferentem rule should apply to all unclear clauses, but art. 5:103 PECL says it
should apply only to terms that are ‘not individually negotiated’.43 However, both pro-
posals state that it is preferred that terms should be interpreted against the party that
drafted or supplied the term.
These ambiguity rules, like all canons of interpretation, presuppose that the mean-
ing of the clause in question is indeed unclear. But it must be noted that, in their
eagerness to protect the consumer from unfair standard form terms, the courts have
proved remarkably clever at discovering or divining ‘ambiguities’ in such clauses. This
was especially true when the courts had no statutory power to strike down clauses
unfairly prejudicial to the customer. Now that such provisions have been enacted in
most European countries, there is no need to use ambiguity rules in order to do indi-
rectly what is better done directly by controlling the substance of general terms of
business in an open manner.44

E. Forms of Constructive Interpretation

Interpretation or construction of a contract is not limited just to ascertaining the
meaning of what the parties actually said. While the contract is being performed, a
problem may arise for which the parties have provided no solution—​either because
they did not foresee the problem at all, or foresaw it and failed to deal with it. There
is an omission in the contract, but how can that be? Sometimes, when concluding a
contract parties think only about the main promises they make to each other, and

41 Article 5 sent. 2 EU Directive 93/​13/​EEC of 5 April 1993 (OJ L 95 p. 29). See also art. L. 133-​2 Code de
la consommation; art. 6:238 (2) BW; § 915 ABGB. This rule applies in Germany even if the general terms
and conditions have been agreed between businesses and it is a business that is trying to rely on the rule.
See § 305c(2), 310 BGB and below, pp. 136ff.
42 See now art. 1190 Code civil, which provides that doubts over the terms of a standardised contract
are to be resolved ‘contre celui qui l’a proposé’. See also art. 1370 Codice civile and art. 1288 Spanish
Civil Code. Under English law, the contra preferentem rule only applies where the aim of the unclear
contractual clause is to waive liability. See Treitel (n 9) no. 7-​1014ff. But case law in other countries also
predominantly deals with such clauses.
43 On this, see Zimmermann (n 1) 1360ff.
44 The Hoge Raad was explicit on this in HR 1 July 1977, [1978] NedJur 125 and HR 28 Sept. 1989, [1990]
NedJur 583. See also below, pp. 134ff.
 Forms of Constructive Interpretation 101

cover only the essential issues. In other cases, they say nothing on the conditions that
constitute a breach of contract and the practical consequences that ensue. Such omis-
sions are not due to stupidity or idleness of the parties, but that negotiations over the
omitted points do not seem worth the effort, are too difficult or expensive, or would
have derailed the contract negotiations. It may also be that the parties wish to por-
tray themselves as effective in the pre-​contractual phase and do not want to address
the issue of what will happen if things go wrong. Particularly in the case of long-​term

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contracts—​such as employment contracts, shareholder agreements, or multi-​year sup-
ply agreements—​the parties lack sufficient will to consider all the ways in which a
contract might go wrong and to account for such contingencies in the contract. The
reason behind most contractual omissions is an economic consideration. Contractual
negotiations cause an expense (transaction cost) that is out of proportion to the benefit
achieved. If the probability of a particular risk occurring is 1:100, and in this case the
party suffers a cost of 500, it would not make sense to invest more than 5 in contrac-
tual negotiations to transfer the risk to the other party. Therefore, it is no coincidence
in practice that relatively ‘complete’ contracts are only drawn up where the expense
is justified. This is the case, for example, when both parties have a lot of money rid-
ing on the contract, or when one of the parties concludes many contracts of the same
type—​even if the single contracts are for only a small economic amount—​so that the
expense of drafting lengthy and detailed contracts (usually in the form of general
terms and conditions) is justified. Of course, there is no such thing as a ‘complete’
contract. Experience shows that even if the parties and their lawyers have taken great
care to draft the contract, there will still be omissions that need to be filled by a judge.
Sometimes, in this case the judge will apply the default rules that the legislature or
case law hold in reserve in the absence of an agreement by the parties. If there are no
such rules, or if they cannot be applied, continental legal systems correct the omission
by applying ‘constructive interpretation’. In England, the contract is supplemented
with an ‘implied term’, which—​in accordance with the traditional English approach—​
has nothing at all to do with the general rules of interpretation. However, recent case
law seems to indicate that ‘implication of a term’ is really nothing more than correct
interpretation of the contract.45
The sets of international rules are unanimous that the contractual omission should
be filled by informal agreement, to be determined by the judge taking into account the
intention of the parties, the nature and purpose of the contract, the customary prac-
tices of the parties, commercial practices, and good faith. The corresponding provi-
sions can usually be found in the sections governing ‘content’ of the contract, not its

45 See Lord Hoffmann in Attorney General of Belize v. Belize Telecom Ltd. [2009] 1 WLR 1988 (PC): ‘It
follows that in every case in which it is said that some provision ought to be implied in an instrument,
the question for the court is whether such provision would spell out in express words what the instru-
ment, read against the relevant background, would reasonably be understood to mean’ (Nr. 21). Also
Lord Hoffmann, ‘The Intolerable Wrestle with Words and Meanings’ (1997) 114 S.Afr. LJ 656, 662: ‘In
fact, of course, the implication of a term into a contract is an exercise in interpretation like any other. It
may seem odd to speak of interpretation when, by definition, the term has not been expressed in words,
but the only difference is that when we imply a term, we are engaged in interpreting the meaning of the
contract as a whole.’
102 Interpretation of Contracts

interpretation, thus following the traditional English approach that allows judges to
supplement the content of a contract with an implied term.46

I. Implication of terms by default rules​

In this situation, the continental judge looks first to the civil and commercial codes
and any special laws, since for most current types of contract they contain rules

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designed to be applied by the court ‘in default’ of a contractual agreement by the par-
ties. In France, these statutory rules, along with the glosses added by the courts, are
called règles supplétives, in Germany dispositives Recht.47 Thus, when parties to a sale
in France have said nothing about the seller’s liability for latent defects, the courts
apply not only art. 1645 Code civil—​which renders the seller who knows of the defect
liable for all consequential loss due to it—​but also the judge-​made rule, which imputes
such knowledge to all commercial distributors such as manufacturers, wholesalers,
and retailers.
The aim of these suppletive or dispositive rules lain down by the legislature and
developed by the courts is not only to accommodate the typical interests of the parties
in a just manner, but also to save the parties the expense of prolonged negotiation by
offering them appropriate ‘default rules’.
Although continental legal systems offer a fairly complete set of dispositive rules for
the most important types of contract, there is an issue that the Common Law fails to
address: this is whether the parties can also conclude other contracts and, if they have
done so, how the applicable dispositive rules are to be determined. It goes without say-
ing that the principle of freedom of contract allows the parties to conclude other con-
tracts. So in a contract between hotelier and guest, for example, the court may apply
the dispositive rules on lease if the guest is unhappy with the condition of his hotel
room, those on sale if he is given a bad meal, and those on deposit if his luggage is sto-
len after being accepted for safe keeping.48
In England, too, gaps in contractual agreements are made good by recourse to
general rules—​‘terms implied in law’—​which apply unless the parties have provided
otherwise and depend on the type of contract in issue. The Sale of Goods Act 1979
and the Supply of Goods and Services Act 1982 contain rules which, as applied in

46 See art. 6:102 PECL; art. 32(1) CEC; art. 68 CESL. The rule in PICC tries to accommodate both
approaches. See art. 4.8 (interpretation) and art. 5.1.2 (supplementing contract with an ‘implied term’).
Even if the systematic ordering of the question has little relevance, the best solution would be to
regard rectification of an omission as a specific problem of contractual interpretation to be taken into
account by the judge to the same extent as other applicable general principles of interpretation. See also
Zimmermann (n 1) 1364f.
47 See, for example, H Mazeaud, L Mazeaud, J Mazeaud, and F Chabas, Leçons de droit civil, vol. III.1:
Obligations, Théorie générale (9th edn, 2006) no. 347f; D Medicus, Allgemeiner Teil des Bürgerlichen
Gesetzbuchs (9th edn, 2006) mn. 338ff; R Bork, Allgemeiner Teil des Bürgerlichen Gesetzbuchs (4th edn,
2016) mn. 532ff. It is to be noted that while dispositive law generally yields to any contrary provision
adopted by the parties, this is not invariably so. Many legal systems show a tendency to treat agreements
in the form of general conditions of business as invalid if they purport to strip away from the customer
the protection afforded to him by dispositive rules. See also below, pp. 140ff.
48 On such contrats innomés, see Mazeaud and Chabas (n 47) no. 111f; on typengemischte Verträge see
K Larenz and C-​W Canaris, Lehrbuch des Schuldrechts, vol. 2: Besonderer Teil (Part 2) (13th edn, 1994)
§ 63; on ‘mixed contracts’, see art. II.-​1:108 DCFR.
 Forms of Constructive Interpretation 103

the cases, perform the same role for contracts of sale and services as the correspond-
ing suppletive rules in the continental civil codes. Statutory provisions of this kind
are not, however, very common, and in their absence English judges apply rules they
themselves have developed in relation to the major types of contract, such as govern
contracts of sale, carriage, and insurance. If an architect contracts to provide plans
for a building that must meet certain requirements and guarantees, but there is no
express term as to quality, the courts hold that it is an ‘implied term in fact’ that the

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work must meet those requirements, and the architect must pay damages even if not
personally responsible for the building not meeting those requirements.49 The same is
true for other contracts of work and labour, as where a publicity firm was to advertise
its client’s wares by flying low over towns towing a streamer bearing the slogan ‘Eat
Batchelor’s Peas’. The firm chose to fly on Armistice Day when the crowds in the main
square were observing a period of silence and contemplation. The public were scandal-
ised, and the client was allowed to terminate the agreement:
There must be implied in that contract a term that the flying under the contract would
be carried out with reasonable skill and reasonable care, having regard to the object
of the contract, and, in whatever precise words the implied obligation is expressed, it
must be, I think, certainly wide enough to exclude flying in a way which would bring
the advertisers into hatred and contempt.50
Likewise, a person who hired out a motorboat was liable under the ‘implied term that
the vessel hired shall be as fit for the purpose as reasonable care and skill can make it’.51
And when the lifts and staircase lights in a fifteen-​storey tower block were constantly
out of order because the landlord failed to maintain them properly, the landlord was
in breach of an implied term ‘to take reasonable care to maintain the common parts
of the building in a state of reasonable repair’.52 An employer is bound to ensure that
its employees’ place of work is such that they are exposed to no unnecessary risk to
their health, even if the contract says nothing about it,53 but the employer is not bound
to take out insurance to cover employees against any tortious liability they may incur
towards third parties whom they cause injury while at work.54

II. Constructive interpretation
‘Terms implied in law’ and dispositive statutory rules are usually framed in such gen-
eral terms as to be applicable, failing contrary provision, to all contracts of a particu-
lar type. But they are not of much use where the parties have left open a particular
point which calls for a made-​to-​measure solution. Suppose that two doctors agree to
exchange practices and one of them, not caring for the new place of work, wants to

49 Greaves & Co. Ltd. v. Baynham Meikle & Partners [1975] 3 All ER 99.
50 Aerial Advertising Co. v. Batchelor’s Peas Ltd. [1938] 2 All ER 788, 792, per Atkinson J.
51 Reed v. Dean [1949] 1 KB 188, 193. 52 Liverpool City Council v. Irwin [1977] AC 239.
53 Matthews v. Kuwait Bechtel Corp. [1959] 2 QB 57.
54 Lister v. Romford Ice & Cold Storage Co. [1957] AC 555. By contrast, a term will be implied into a
contract for driving lessons that the instructor has insurance covering the learner driver’s liability: see
British School of Motoring v. Simms [1971] 1 All ER 317.
104 Interpretation of Contracts

return to the previous base only nine months later. Would this be allowed, or can a
term be implied disallowing such return in case the doctor’s old patients flock back
to him at the expense of the other doctor? Again, in The Moorcock55 the plaintiff was
to unload his ship at the defendant’s jetty on the Thames; when the tide went out, the
ship naturally settled, and was holed because the riverbed was uneven. Could it be said
that the defendant was contractually bound to warn the plaintiff if he knew that the
bed of the river was uneven at that point, or tell him if he did not? In neither of these

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two cases did there appear to be any dispositive rules or terms implied by law which
could be used to fill in the gaps.
In such cases, English judges ask whether the incomplete contract can be filled by
a ‘term implied in fact’.56 This is only done when the term to be implied is so obvious
that if a disinterested observer had drawn the parties’ attention to its omission, they
would unhesitatingly have agreed to its inclusion.57 A test often applied is whether
such an addition is necessary ‘to give the transaction such business efficacy as the par-
ties must have intended’.58 It was so held in The Moorcock, since the defendant had
much better access than the plaintiff to information about the condition of the river-
bed adjacent to his mooring:
The owners of the jetty, or their servants, were there at high tide and low tide, and
with little trouble they could satisfy themselves, in case of doubt, as to whether the
berth was reasonably safe. The ship’s owner, on the other hand, had not the means of
verifying the state of the jetty.59
Judges in Germany would ask if the gap in the contract can be filled by constructive
interpretation (ergänzende Vertragsauslegung), and frequently use the following for-
mula: ‘Where the parties have omitted to say something’ the judge must ‘discover and
take into account what, in the light of the whole purpose of the contract, they would
have said if they had regulated the point in question, acting pursuant to the require-
ments of good faith and sound business practice’.60 In the case of the doctors who
exchanged practices, the Bundesgerichtshof used this form of words and held that nei-
ther party was free to return to the immediate vicinity of his previous practice for a
period of two to three years.61 Contracts for the sale of a business are often construc-
tively interpreted so as to impose on the seller an obligation not to start up another
business in competition with the buyer so as to prejudice the goodwill of the busi-
ness.62 Thanks to constructive interpretation, a person who had taken a lease of one of
the two shops in a building could prevent the owner from letting the other to a person

55 (1889) 14 PD 64.
56 See Treitel (n 9) no. 6-​029ff; McKendrick (n 19) no. 9.8; Scally v. Southern Health and Social Services
Board [1992] 1 AC 294, 306f.
57 See Shirlaw v. Southern Foundries Ltd. [1939] 2 KB 206, 227.
58 Luxor (Eastbourne) Ltd. v. Cooper [1941] AC 108, 137, per Lord Wright.
59 The Moorcock (n 55) at 69, per Lord Bowen.
60 BGH 18 Dec. 1954, BGHZ 16, 71, 76. See also BGH 22 Apr. 1953, BGHZ 9, 273, 278; BGH 29 Apr.
1987, BGHZ 84, 1, 7. Swiss and Austrian courts decide likewise: see BG 23 Apr. 1981, BGE 107 II 144, 149;
BG 13 Oct. 1981, BGE 107 II 411, 414; OGH 1 Feb. 1972, [1973] JBl 309; OGH 31 May 1983, [1983] JBl 592.
61 BGH 18 Dec. 1954 (previous note) at p. 81. 62 RG 31 May 1925, RGZ 117, 176.
 Forms of Constructive Interpretation 105

in the same line of trade.63 Gaps in partnership agreements are also often filled in this
manner.64
French courts actually decide in much the same way, even though they often invoke
the rule that the gap is to be filled by the commune intention des parties contractantes. For
example, it has been held—​‘par une interprétation rendu nécessaire par l’ambiguïté de la
convention sur ce point’—​that a radio station which had commissioned a play, accepted
the manuscript, and paid the playwright a commission without objection was not only

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entitled, but actually obliged, to produce and broadcast the play, and was liable in dam-
ages for refusing to do so.65 The Cour de cassation decides likewise in cases where a con-
tract becomes incomplete because an agreed provision subsequently proves unworkable.
For example, if the indexation which the parties to a long-​term contract have selected
to determine future fluctuations in the price payable proves to be inoperative because
the stipulated index does not exist, or ceases publication, or fails to obtain the requisite
authorisation, the courts look for the closest possible clause which will work or obtain
authorisation, and fill the gap in this way.66
Whether such constructive interpretation is really ‘interpretation’ at all—​ or
whether the judge is not simply fixing on a rule which provides a just and appropriate
solution to the dispute—​is a point on which views may differ. Usually it is impossible,
as well as unnecessary, to draw a clear distinction. Certainly the judge must not reach
a conclusion at variance with what the parties have actually agreed, nor read a clause
into the contract just because it appears reasonable to do so. Similarly, a judge may not
try to save a party from its nonchalance, negligence, or predilection for risk-​taking
by inserting—​at the expense of the other party—​a clause which the party would have
been well advised to include, but did not. The function of the judge, according to the
apt phrase of Ripert-​Boulanger, is ‘to make the contract speak’ rather than to speak
himself.67 If a contract does not include agreement about the allocation of a particular
risk, the judge must fill the gap with a provision that the parties would be presumed
to have agreed if they had negotiated the allocation of the risk and had agreed on the
most advantageous—​and thus most efficient—​solution for each party. In this sense
it would be possible to speak of the ‘hypothetical will of the parties’. Normally, the
burden of the risk should be allocated to the party for whom the costs of averting the
risk are lowest, who can reduce the probability of the risk occurring at a lower cost

63 RG 2 Feb. 1931, RGZ 131, 274.

64 See, for example, BGH 23 Nov. 1978, [1979] NJW 1705; BGH 28 Jun. 1982, [1982] NJW 2816.
Constructive interpretation may be used if the available statutory dispositive rules do not match the
probable intention of the parties. For the relationship between constructive interpretation and disposi-
tive rules, see Bork (n 47) mn. 534ff.
65 Civ. 2 Apr. 1974, Bull.cass. 1974.I. no. 109.
66 Civ. 15 Feb. 1972, D.1973, 417, n. J Ghestin; Com. 7 Jan. 1975, JCP 1975.II.18167, n. J Ghestin; Civ. 9
Nov. 1981, Bull.cass. 1981.I. no. 332; Civ. 18 July 1985, Bull.cass. 1985.III. no. 113. This has now been laid
down expressly in art. 1167 Code civil (as amended). To the same effect are BGH 25 Jan. 1967, [1967] NJW
830; BGH 30 Oct. 1974, BGHZ 63, 132, 136.
67 G Ripert and J Boulanger, Droit Civil vol. II (1957) no. 470: ‘l’art de faire parler le contrat’.
106 Interpretation of Contracts

than the other party, or who can best insure against the consequences of the risk—​
including by taking out insurance.68

III. Collateral duties
So far we have been considering cases where the parties have omitted to deal with
some particular aspect of their principal duties. Somewhat different are cases where

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they have failed to regulate their collateral duties, such as the duty, as the contract
proceeds, to take care of the other party’s life or health, to look after the other par-
ty’s property carefully, or inform or warn about possible hazards. In cases like this,
German law rarely seeks to find a gap in the contract to be settled by means of con-
structive interpretation. Since judges in Germany feel obliged to refer to a statutory
text, they often invoke § 242 BGB, which requires them—​when deciding what is due
from the party rendering performance—​to apply the same standard as they apply
under § 157 BGB when interpreting a contract, namely the standard of good faith and
proper commercial practice. Both sections are often cited in tandem, and writers agree
that it is neither possible nor necessary to distinguish their respective fields of opera-
tion.69 The French courts may now rely on art. 1194, which provides that a contractor
must do not only what he has expressly promised to do, but also what is required by
‘l’équité, l’usage ou la loi’.
Such legislative provisions being at best hortatory, with no specific applicable con-
tent, the rules on the implication of collateral contractual duties not expressly regu-
lated by the parties are entirely judge-​made. In France, this development can be dated
back to 21 November 1911, when the Cour de cassation decided for the first time that a
carrier was obliged not only to carry the passenger to the agreed destination but also,
as part of the contract, to see that he arrived at his destination safe and sound.70 So if
the passenger is injured in an accident during the journey, the carrier may be liable
for breach of his contractual obligation de sécurité. There is no need to show that the
carrier was at fault; indeed, the carrier can avoid liability only by proving that the
accident was due to a cause étrangère, such as an incident unconnected with the car-
riage or perhaps the fault of the passenger.71 This contractual obligation is stricter than
tortious liability, which reveals why the French courts have found such a contractual
obligation de sécurité not only in contracts of carriage, but in practically all types of
contract whereby one party’s person or property is brought into an area of danger
under the control of the other party, who can be expected to offer such protection as
the circumstances indicate.72 The French courts have stuck to their position, although

68 The same considerations arise with the issue of whether or not standard terms and conditions are
‘reasonable’ and thus valid, or if an ‘extraordinary’ risk has been realised which the parties had not con-
sidered upon conclusion of the contract and had thus not taken into account (see pp. 140ff.).
69 See, for example, D Medicus and W Lorenz, Schuldrecht vol. I (19th edn, 2010) § 16 II 1.
70 Civ. 21 Nov. 1911, D. 1913.1.249, n. L Sarrut.
71 This is true only when the obligation de sécurité is an obligation de résultat, as it is in the case of car-
riage. On the distinction between obligations de résultat and obligations de moyens, see below, pp. 248ff.
72 See the impressive presentation in G Viney, Les obligations, Responsabilité: conditions (1982)
no. 499ff.
 Forms of Constructive Interpretation 107

the law of tort has subsequently developed in such a way as to weaken the original rea-
son for treating obligations de sécurité as contractual.73
In German law, too, a plaintiff can in many respects do better by suing in contract
rather than tort now that the courts have adopted wide contractual duties of care for
the person and property of the other party.74 They have done this in order to effect a
reasonable allocation of risks, without purporting to base it on any actual or hypo-
thetical will of the parties to this effect.75

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A similar development has taken place as regards contractual duties to inform,
advise, or warn (obligations de renseignement et de conseil). Some contracts have the
provision of information as their very core, as where an expert is to report on the
authenticity of a picture, the value of a plot of land, or the prospects of success in liti-
gation, but we are concerned here with cases in which the debtor’s principal obliga-
tion is something else, such as to deliver goods, see to a particular piece of business,
afford a credit facility, or take out insurance cover. Such a person may also be placed
under an obligation to advise the other party and give him all the relevant informa-
tion he possesses or ought to possess, information to which he has easier access, usu-
ally because of his expert knowledge, and which the other party needs. Article 1129-​1
Code civil now provides a general statutory basis for a party’s mandatory duty to pro-
vide information on all facts that have a ‘direct’ and ‘necessary’ link with the subject
matter of the contract or the characteristics of the parties and are on that ground
‘important’ for the other party. For example, even if the thing sold is perfectly good,
a seller must give the buyer such information as he needs to be able to use it safely, to
install it correctly, and to maintain it properly.76
Under English law, too, contractors are often bound to take reasonable care to avoid
causing damage to their partner. But this duty is seldom seen as a contractual duty
based on an implied term. In The Moorcock,77 the defendant was held liable for breach
of contract in not warning the plaintiff of the unevenness of the riverbed. In general,
however, the duty is not held to arise out of the contract: the English courts prefer to
deal with these cases under the law of tort, principally the tort of ‘negligence’.
This is possible in Germany as well: a buyer who suffers personal injury through
being insufficiently informed of how to use the item purchased can base a claim for
damages not only on the collateral duty (of information) in the sale contract, but also
on the general duty in tort to avoid causing harm.78 However, if the only damage suf-
fered by the defendant consists of mere pecuniary loss (reine Vermögensschaden),
only the contractual claim is possible, since in principle pure economic loss is not

73 See also Viney (n 72) no. 501.

74 Germany has indeed gone further than France in two respects. First, German courts allow contrac-
tual claims for damages when the damage is caused by breach of duty during the stage of negotiations,
where France would allow only a claim in tort. Secondly, German courts accept that contractual duties
of care may be owed not only to the other contracting party but also to third parties. On this last point,
see below, pp. 325ff.
75 See also Viney (n 72) no. 515.
76 See, for example, Com. 5 Feb. 1973, JCP 1974.II.17791; Com. 16 Oct. 1973, JCP 1974.II.17846, n. P
Malinvaud; Civ. 9 Dec. 1975, JCP 1977.II.18588, n. P Malinvaud; BGH 5 Apr. 1967, BGHZ 47, 312; BGH
19 Feb. 1975, BGHZ 64, 46.
77 Above, n 55. 78 BGH 19 Feb. 1975 (n 76) 49.
108 Interpretation of Contracts

compensable under § 823(1) BGB. On this point, the situation in France is different
again. No claim in tort arises in these cases, not because art. 1240 ff. (formerly art.
1382 ff.) Code civil would not apply, but because the doctrine of non-​cumul prevents a
tortious claim from arising where there is a breach of a contractual obligation, here the
obligation de sécurité, de renseignement ou de conseil.
From all this, we can draw two conclusions. The question whether or not there is a
collateral contractual duty in a given case depends not on the actual or supposed will

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of the parties but, as in the law of tort, on whether the imposition of such a duty is jus-
tified as a reasonable allocation of the risks. Secondly, whether the defendant’s liabil-
ity arises in contract (ex contracto) or tort (ex delicto) is a question of technique rather
than substance. What matters is whether, in the relevant jurisdiction, it is easier for
the judge to reach the desired result by taking the contractual or the tortious path. If
both paths are open, the classification is not that important. Thus in Lister v. Romford
Ice, when the parties differed on the question whether the employee’s duty to take care
of his employer’s property arose from an ‘implied duty’ or under the law of tort, Lord
Radcliffe regarded the question as purely academic:
Since, in any event, the duty in question is one which exists by imputation or implica-
tion of law and not by virtue of any express negotiation between the parties, I should
be inclined to say that there is no real distinction between the two possible sources
of obligation.79

79 See n 54 at 587.