Principles for Interpretation of Contracts under Ethiopian law
Have you ever wondered how a confusing clause of a contract could be interpreted when controversy arises? Below you will find the basic principles for interpretation of contracts according to Ethiopian law.
In this case, interpretation means how the parties in the contract, third parties or even the court think its provisions mean. Framing the contract is the obligation of the parties and they choose the terms that bind them. Under Ethiopian law, this is done with the minimum legal interference possible. (The Civil Code of Ethiopia art 1711).
So as a principle, if the provisions of a contract seem, in the eyes of a reasonable person, clear courts cannot not infer a different meaning other than the one provided by the contract. (The Civil Code of Ethiopia art 1733). It is only under exceptional circumstances that the law allows another meaning to be inferred from a contract’s provisions, these being:
2. General terms: (The Civil Code of Ethiopia art 1735) It does not matter how many general terms are used, if it can be sufficiently proven that the parties used these general terms to refer to specific objects of agreement this shall be considered by the court.
3. Positive interpretation: (The Civil Code of Ethiopia art 1737) this occurs when a contract contains a term or article that can have a double translation. One translation defeats the purpose of the contract where as the other translation keeps the contract effective. The law chooses to ignore the first translation keeps the contract effective, taking into account that the parties’ intention to be bound is more important than a tricky provision.
4. Interpretations in favor of the debtor: (The Civil Code of Ethiopia art 1738) where the terms of a contract are unclear, the court may take into account for whose advantage these terms were put in. And taking into account who bears the obligation, it shall favor (even though slightly) him in its interpretation. The reason behind this would be fairness. If the terms are unclear, a party which assumes an obligation put on him may be left with a heavier obligation than he thought he will have to fulfill. This law aims to protect him from this.
5. Gratuitous contracts: (The Civil Code of Ethiopia art 1739) since gratuitous contracts are basically contracts of charity. So only one party, let’s call him the giver owes a debt and the other owes only privilege. The law does not want to create additional encumbrance on such a positive act. So provisions are inferred in a way that will provide such debtor with the least obligation.
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