The Interpretation of Contracts Under California Law

California law provides a number of statutes related to the interpretation of contracts. These provisions are contained in Civil Code Division 3, Part 2, Title 3, which was originally enacted in 1872. Section 1635 provides that all contracts, whether public or private, are to be interpreted by the same rules, except as otherwise provided by this Code. Section 1636 states that a contract must be so interpreted as to give effect to the mutual intention of the parties as it existed at the time of contracting, so far as the same is ascertainable and lawful.

Section 1637 states that, for the purpose of ascertaining the intention of the parties to a contract, if otherwise doubtful, the rules given in this Chapter are to be applied. Section 1638 provides that the language of a contract is to govern its interpretation, if the language is clear and explicit, and does not involve an absurdity.

Section 1639 specifies that, when a contract is reduced to writing, the intention of the parties is to be ascertained from the writing alone, if possible; subject, however, to the other provisions of this Title. Section 1640 provides that, when through fraud, mistake, or accident, a written contract fails to express the real intention of the parties, such intention is to be regarded, and the erroneous parts of the writing disregarded.

Section 1641 states that the whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other. Section 1642 specifies that several contracts relating to the same matters, between the same parties, and made as parts of substantially one transaction, are to be taken together.

Section 1643 provides that a contract must receive such an interpretation as will make it lawful, operative, definite, reasonable, and capable of being carried into effect, if it can be done without violating the intention of the parties. Section 1644 specifies that the words of a contract are to be understood in their ordinary and popular sense, rather than according to their strict legal meaning.

Section 1645 states that technical words are to be interpreted as usually understood by persons in the profession or business to which they relate, unless clearly used in a different sense. Section 1646 provides that a contract is to be interpreted according to the law and usage of the place where it is to be performed; or, if it does not indicate a place of performance, according to the law and usage of the place where it is made.

Section 1646.5 specifies that the parties to any contract, agreement, or undertaking, contingent or otherwise, relating to a transaction involving in the aggregate not less than $250,000 may agree that the law of this state will govern their rights and duties in whole or in part, whether or not the contract, agreement, or undertaking or transaction bears a reasonable relation to this state.

However, this section does not apply to any contract, agreement, or undertaking (a) for labor or personal services, or (b) relating to any transaction primarily for personal, family, or household purposes.

Section 1647 provides that a contract may be explained by reference to the circumstances under which it was made, and the matter to which it relates. Section 1648 states that, however broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.

Section 1649 specifies that, if the terms of a promise are in any respect ambiguous or uncertain, it must be interpreted in the sense in which the promisor believed, at the time of making it, that the promisee understood it. Section 1650 states that particular clauses of a contract are subordinate to its general intent.

Section 1651 states that, where a contract is partly written and partly printed, or where part of it is written or printed under the special directions of the parties, the written parts control the printed parts, and the parts which are purely original control those which are copied from a form.

Section 1652 requires that any “repugnancy” in a contract must be reconciled, if possible, by such an interpretation as will give some effect to the repugnant clauses, subordinate to the general intent and purpose of the whole contract. Section 1653 states that words in a contract which are wholly inconsistent with its nature, or with the main intention of the parties, are to be rejected.

Section 1654 provides that, in cases of uncertainty not removed by the preceding rules, the language of a contract should be interpreted most strongly against the party who caused the uncertainty to exist. Section 1655 states that stipulations which are necessary to make a contract reasonable, or conformable to usage, are implied, in respect to matters concerning which the contract manifests no contrary intention.

Section 1656 states that all things that in law or usage are considered as incidental to a contract, or as necessary to carry it into effect, are implied therefrom, unless some of them are expressly mentioned therein, when all other things of the same class are deemed to be excluded.

Section 1656.1 provides that, whether a retailer may add sales tax reimbursement to the sales price of the tangible personal property sold at retail to a purchaser depends solely upon the terms of the agreement of sale.

Section 1656.5 states that, whether a qualified heavy equipment renter may add estimated personal property tax reimbursement to the rental price of heavy equipment property to a lessee depends solely upon the terms of the rental agreement. This section also defines the terms “qualified heavy equipment renter” and “rental price.”

Section 1657 states that, if no time is specified for the performance of an act required to be performed, a reasonable time is allowed. If the act is in its nature capable of being done instantly, it must be performed immediately upon the thing to be done being exactly ascertained.

Section 1657.1 states that any time specified in a contract of adhesion for the performance of an act required to be performed is required to be reasonable. Section 1659 provides that, where all the parties who unite in a promise receive some benefit from the consideration, whether past or present, their promise is presumed to be joint and several.

Section 1660 provides that a promise, made in the singular number, but executed by several persons, is presumed to be joint and several. Section 1661 specifies that an executed contract is one, the object of which is fully performed. All others are executory.

Section 1662 states that any contract made in this State for the purchase and sale of real property is to be interpreted as including an agreement that the parties must have specified rights and duties, unless the contract expressly provides otherwise.

Section 1663 defines the terms “Euro,” “introduction of the Euro,” and “ECU” or “European Currency Unit.”