Contract interpretation: the impact of readability

Abstract

The standard form of contract plays a significant role in a construction project as it communicates the procedures to be adopted in executing the project including the determination of the rights and obligations of contracting parties. Hence, an acceptable degree of commonality in interpretation of this document by different contracting parties is a prerequisite for the smooth functioning of a construction project. The aim of this research is to ascertain whether there is a relationship between readability of contract clauses and their interpretation. Readability is concerned with the complexity of words and sentences of text and it is commonly assessed by readability formulas. The survey undertaken for this research measured the ability of construction contract clauses having different readability values to convey a common understanding to all categories of respondents in terms of the degree to which risk was apportioned between the client and the contractor. The study reveals that there is a relationship between readability and contract interpretation. When the readability of the contract document is high, there found to be a high degree of commonality in interpretation of the document by different readers.

Keywords:

• Standard form of contract
• contract clauses
• readability
• risk
• interpretation