"...As required by section 25(a) of the Contracts (General Part) Law, 5733-1973, the intentions of the parties shall be interpreted as it is implied in the contract, and if it is not implied by it, from the circumstances. And if the contract is clear and its language is unequivocal, there is no need to
rely on the circumstances, and certainly not the commercial logic or economic feasibility, which may be influenced by individual or conjuncture considerations of one of the parties, which he is not obligated to disclose to the other party or to specify in the contract" (Civil Appeal 406/82 [7], at p. 499).
In a similar vein, President Shamgar noted:
"...The starting point in the process of interpretation is found in the contract itself... The exhaustion of the contractual text requires, first of all, an examination of the literal meaning of the phrases and provisions contained in the contract... If this does not lead to a clear conclusion, a second stage arrives, in which the court must choose, from the variety of linguistic meanings that come into account, the meaning that realizes the contractual purpose..." (Civil Appeal 3804/90 Delta for Investments and Trade (Karnei Shomron) in Tax Appeal v. Supergas, Israeli Gas Distribution Company in Tax Appeal [16], at p. 213).
The "two-stage theory" establishes a distinction between "internal interpretation" (which interprets the language of the contract without referring to external circumstances) and "external interpretation" (which interprets the language of the contract on the basis of data external to the contract). See Civil Appeal 702/84 Yuval Gad in Tax Appeal v. Land Appreciation Tax Administration [17]. The criterion that distinguishes between the two types of interpretation is the clear language of the contract. "... There is no room for external evidence regarding the intention of the parties when the language of the document is clear..." (Judge Netanyahu Other Municipal Motions 650/84 Z. Stern et al. v. Ziuntz [18], at p. 384); "If it is clear that the relevant stipulation is clear, then there is certainly no room for recourse to external circumstances, and the court must decide the interpretation of the words as it sees fit... The reference to the circumstances is an alternative, which arises only when there is no clear understanding of the text of the text..." (Judge Beisky Other Municipal Motions 170/85 Zaken Brothers Contracting Company in Tax Appeal v. Mizrahi [19], at p. 638). The inherent difficulty inherent in this exegetical approach is that the clarity of the language must be determined at the end of the exegetical process and not at its beginning. The clarity of the language is not determined by the judge's pre-interpretive sense of language, but rather is the result of an interpretive conclusion that comes at the end of the interpretive process. Only an appeal to external sources may assure the commentator that the language is unclear. What appears to be obvious may turn out to be unclear in light of the circumstances. Since it is generally accepted that the intentions of the parties are a proper interpretive criterion, it is possible to determine that the language is clear only after the judge has completed the interpretive process, i.e., he has determined the intentions of the parties and interpreted the language of the contract accordingly. The language of the contract is clear only when it fulfills the intentions of the parties. Indeed, linguistic science and legal science reject the proposition that language is clear "in itself." I discussed this in one of the parashas, stating: