CHAPTER 6

Objective Contextual Interpretation

hapters 2 to 5 largely describe, analyze, and evaluate judicial practice Cas a practical matter. This chapter takes a different tack. It asks what elements interpreters should take into account when interpreting a contract—a normative question. We will address, among other things, the key question that we reserved in the preceding chapters: How much context is needed to reach appropriate results from each of the three tasks in contract interpretation? The answers depend on the goals set forth in Chapter 1 and other reasons, such as the necessity of context to ascertain the meaning(s) of language. The answers may vary depending on whether an interpreter is identifying the terms to be interpreted, determining whether the contract is ambiguous in a contested respect, or resolving any ambiguity that appears. Here, as elsewhere in the law, we should favor the relatively best of the available alternatives; we should not measure a proposal against an ideal that is not implementable at reasonable cost by contract parties and their lawyers before litigation commences, and by judges and juries in courts of law.

In brief, the balance of the goals and other reasons supports a normative thesis that answers the key question at the three steps as follows. First, we should retain the parol evidence rule. To determine whether the rule applies, a court should answer the question of integration by taking into account the allegation of a parol agreement and the writing’s intrinsic contextual elements—the whole contract document and its evident

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