In order to raise the level of contractual security, a cultural-legal common denominator is required for those involved in the drafting and interpretation of contracts. This common denominator is based on legal education, practical experience, and the development of rules of interpretation that will enable the parties, through their lawyers, to put their intention in writing, and to rely on the fact that if the document ever serves as a subject of litigation, the judge will be able to get to their intention.
- We therefore wish to adhere to the golden rule according to which words, expressions and sentences included in a certain text should be given their usual meaning in everyday language, the same language used by those who composed the text. Our opinion is that if we do adhere to this rule, we will not need a complicated interpretation except in exceptional cases, and at the same time we will increase the certainty and confidence of the public and of the individual when they themselves are bound into a contract. We wish to once again elevate the status of language when interpreting contracts, to restore its superiority over other evidence. Indeed, a contract can and should be understood in its literal sense, and even if the same language is narrowly given to two interpretations, the court will adopt the reasonable interpretation that arises from the language and reject a narrow interpretation that could have been given to the language of the contract in other circumstances. Let us remember and preserve: it was the written contract that the contractors signed and committed themselves to, while the "circumstances" were nothing but the raw material used to create the contract. The written contract, and no one else, constituted the pinnacle of contact and bargaining between the parties, and not only is its seniority evident to all, but we require a clearly ambiguous set of facts until we need "circumstances" to interpret Scripture.
- Thus, even though the court is no longer limited to the language of the contract in the "two stages" format, it is nevertheless appropriate that it should give primacy to the language, both with regard to hearing evidence for the interpretation of a contract and with regard to the consideration of that evidence. The courts must bear in mind that "in most cases, the intentions that arise from the language of the contract are 'safer' and more reliable than the intentions that arise from the circumstances" (Apropim, 300), and in this spirit they must interpret contracts. We are therefore of the opinion that when a court is asked to accept evidence whose purpose is to interpret a written contract, it must exercise extreme caution. First of all, external evidence intended for the interpretation of a written contract will not be accepted as other evidence of the matter. The burden is on the applicant to submit this evidence to explain – before submitting it – the nature of the evidence and how it is superseded by the interpretation of the contract. The degree of persuasion of the court in this context does not have to be the same as the degree of persuasion required at the end of the proceeding, but where the language of the contract is clear on the face of it, the applicant must explain to what extent he wishes to go so far in his interpretation of the verse that is not in accordance with its literal meaning. Second, when the evidence is accepted as admissible evidence, the court will classify it as rejected evidence, i.e., as evidence that at the time of examining the complex as a whole, the court will not bring it as regular evidence unless it is convinced that the written contract was indeed given in the circumstances of the case to different interpretations – even if only because of the same external evidence – and that those evidences may serve as evidence worthy of interpretation that leads to it.
- We will agree that "the clarity of the language must be determined at the end of the interpretive process and not at the beginning of it" (Apropim, 298), and we accept that where the judge encounters a lack of clarity relating to the intentions of the parties to the contract, it is his burden that is imposed on him – if he is required to do so – to hear evidence that will clarify this ambiguity. However, in our opinion, a distinction must be made between patent ambiguity – where the language of the contract, itself, leaves doubt as to the intentions of the parties – and cases in which the contract appears on its face to be a clear contract and the party who wishes to bring before the court external evidence of its interpretation claims latent ambiguity. Compare: Civil Appeal 152/57 Hania Fixman-Nebenzel v. "Oil" Israeli Oil Industries Ltd., IsrSC 11(3) 1439. Where this is a matter of apparent ambiguity, we will all agree that the court will hear evidence if it is required to do so. However, where one of the parties claims an implicit ambiguity, the court will not be required to hear evidence unless the party seeking to present that evidence explains to the court the nature of that evidence and how it affects the interpretation of the contract. In this way, we believe, the court will be able to reach a just solution while maintaining security and certainty. This will also preserve the efficiency of the legal process, since the court will hear external evidence only in appropriate cases. Needless to say, such an interpretive proceeding fits well with the provision of section 25 of the Contracts Law, in its granting seniority and priority to the language of the contract.
- It is therefore necessary to distinguish carefully between the force inherent in the language of the written contract and the force – lesser force – inherent in external evidence intended to interpret the written contract. This distinction will be reflected both in the acceptance of such external evidence and in the assessment of its strength – in relation to the language of the written contract – at the time of the conclusion of the proceeding. Thus, for example, the clearer the language of the contract, the more external evidence of relatively heavy weight will be required in order to overcome the interpretation that is ostensibly required of it. External evidence may come from a variety of sources – drafts prepared during the negotiations, testimonies of the parties regarding their intentions, exchanges between the parties, the conduct of the parties during the negotiations, the context of the contract, and more – but where the language of the contract is apparently clear and the alleged ambiguity is a hidden ambiguity, all of these will find it difficult to overcome the plain language of the contract. The total weight of the external evidence must be considerable before it can overcome the clear language.
Various Contracts - Atomization
- The Apropim rule instructed us as an all-encompassing norm in the laws of interpretation of a written contract and on the subject of the relationship between the written and external evidence that may delegate the interpretation of a contract. In what we have said above, we have discussed mainly the division of "interpretive powers" between the language of a contract and evidence outside the contract whose purpose is to testify to the intention of the parties to the contract, and the determination of a proper and correct balance between the meaning of a contract as it emerges from its explicit letter and the external evidence that is superior to the interpretation and content of a contract; The same things shall apply, with the necessary modifications, to the relationship between the "subjective" purpose of a contract and its "objective" purpose; However, general guidelines that have been established are not enough to guide us on the way. A closer examination will teach us that a contract is not like a contract: there are contracts in which external evidence will not raise or lower in the matter of its meaning almost nothing, and there are contracts in which external evidence will be a major and constitutive player in their interpretation; There are contracts that are small and contain the many: contracts in which the parties converse with each other in a language that a stranger will not understand, and there are contracts in which what is in them is in them and what is not in them is not. Our way of determining the balance between the interpretation of a contract within it and its interpretation according to external evidence must be through atomization, i.e., the examination of a contract or type of contract separately and separately from contracts and from other types of contracts. This is how we have done in analyzing the principle of freedom of expression, distinguishing between different types of expression that we believe are entitled to more or less powerful protections. See, for example: Additional Civil Hearing 7325/95 Yedioth Ahronoth v. Kraus, IsrSC 52(3) 1, 78 ff. Thus, it seems, it is appropriate that we act in our own affairs as well. See and compare: Mautner, 71-72, 87-88, 93-94; Shalev, Contracts, 402-403; Barak, Interpretation of the Contract, 54, 388 ff.
- Indeed, there is no need for extreme imagination in order to understand that a commercial contract does not mean a prenuptial agreement between spouses, and that even commercial contracts are not made up of a single entity. The same is true when comparing a contract drawn up by lawyers, which contains dozens and perhaps hundreds of clauses, and a short-line contract written in handwriting at the end of a short negotiation for the sale or rental of an apartment. After all, a contract concluded between merchants in a certain industry – whose language a foreigner will not understand – is like a contract concluded between one of those merchants and an occasional customer. The balances of interpretation in each of these types of contracts – and many others – will be different, and we do not have the job to finish. It will only be said that the general norm of interpretation, whatever it may be, will only succeed for general instruction. The general norm does not give us a specific instruction as to what kind of delicate tools we should possess in the act of interpreting a contract of a certain kind, and the study will be done slowly, heel to thumb.
- So far – as to the relationship between the language of a written contract and the circumstances of the drafting of the contract.
The Interpretation of a Contract – Subjective Purpose and Objective Purpose
- In what we have said above, we have discussed the depreciation that has occurred in the status of written language in the wake of the Apropim case, and we will now say a few words about the rise in the status of the objective purpose and the use of overarching principles in law – as the principle of good faith – at the time of interpreting a contract.
- Everyone agrees – and this is the beginning of the journey to the interpretation of a contract – that we seek to find the common subjective intention of the parties – which is the intention that section 25 of the Contracts Law speaks of – and that objective values and principles are not intended – mainly – but rather to assist us in the joint subjective expression of the parties. The core of the principle of freedom of contract is to respect the will of the parties – subject to the law and public policy – and in the disclosure of the purpose that both parties intended at the time of the conclusion of the contract, the court is obligated to respect this purpose. See and compare: Parashat Apropim, 302; Mautner, 55-57. However, a closer examination of the matter will teach us that a doctrine is for itself and the application of a doctrine for itself. Although everyone agrees that a subjective purpose is the main one, in practice the court is sometimes hasty to address an objective purpose without exhausting its journey to the subjective purpose that stood before the eyes of the parties. This was the case – in our opinion – in the parasha before us, and we will expand on this later in our discussion. We will now speak only of a normative basis and guiding principles, and the main point of our discussion will revolve around the need to restore order and to set a first subjective purpose and a final objective purpose.
- The use of objective tests to discover the intention of the parties will be made only where the court has not been able to identify in any other way the joint intention of the contracting parties. In such a situation, and only in it, the court is entitled to invoke the objective purpose of the contract, the same purpose that serves the transaction entered into by the parties and which reasonable parties in the shoes of the parties to the present contract wish to achieve. See and compare: Civil Appeal Authority 1185/97 Heirs and Administrators of the Late Milgrom Estate v. Mishan Center, IsrSC 52(4) 145, 157-158 (by President Barak). The court will ask itself "what could have motivated the ordinary reasonable person to enter into an engagement of the type in question and to try to interpret the contract in the most appropriate way to achieve those desired results" (Civil Appeal 552/85 Agassi v. H.I.L.N. Israeli Data Processing Company Ltd., IsrSC 41(1) 241, 245). and having identified the essence of the transaction and the logic of the contract, the court will use these elements to interpret the contract (compare: Skelly v. Doran). However – and this is the main thing – the objective purpose will always retreat from the subjective purpose of the contract. "The court will seek to locate the objective purpose of the parties only in the absence of data regarding their subjective purpose" (Mautner, 56). For the application of objective principles to the contract is analogous to the inclusion of stipulations that the parties did not intend and to the imposition of the court's will on the parties to the contract. In this context, I accept the conclusion of my colleague Justice Rivlin (in paragraph 12 of his opinion), a conclusion that:
The judge should not be in a hurry to determine that the subjective purpose of the contract cannot be located. Courts should refrain from creating "a feeling or 'atmosphere' whereby no contract is clear, everything is open, and any result can be achieved through interpretation"... It is not the role of the court to create a more reasonable contract for the parties than the one they created for themselves. The objective examination will be conducted only when it is not possible to determine the subjective common intention of the parties.