the same idea which the author intended to convey." Construction is thus defined: "Construction is the drawing of conclusions respecting subjects, that lie beyond the direct expression of the text, from elements known from and given in the text conclusions which are in the spirit, though not within the letter of the text."

The distinction thus taken seems of no legal consequence so far at least as the law of contracts is concerned. The sense which the author of words intended to convey by any form of words as distinguished from the "conclusions which are in the spirit though not within the letter of the text" is of no legal importance. The only inquiry which is generally pertinent is the meaning of the language used when judged by the standard adopted by the law. If this standard permits enforcement of "conclusions which are in the spirit though not within the letter of the text," such conclusions have the same importance as conclusions which are in the letter of the text. If the standard does not permit enforcement of conclusions which are not expressed in words, such conclusions are of no legal significance whatever. It seems, however, that a valid distinction though not one of great importance exists between interpretation and construction when those words are given a slightly different definition from that just suggested.

Interpretation is properly the process of applying the ordinary legal standard to the words or symbols used in order to determine their meaning or sense, and rules of interpretation are adopted for this purpose. When it is said that words are given their ordinary meaning, or that technical terms are given their technical meaning, the reason for such rules is because it is a natural supposition that persons addressed may be expected to understand ordinary language or technical terms in the way stated in the rules, and therefore that the meaning or sense of the words will thus be ascertained. Even

4 Professor Thayer says: "It appears that neither common usage nor practical convenience in legal discussions supports the distinction taken by Dr. Lieber in his 'Legal and Political Her

meneutics' (c. 1, § 8, c. 3, § 2), between interpretation and construction. I shall not discriminate them." Preliminary Treatise on Evidence, 411.

when the rule under discussion is that language will be construed most strongly against the party using it, it may be maintained that this also is a rule of interpretation, since it should be anticipated that the person addressed will understand ambiguous language in the sense most favorable to himself, and that his reasonable understanding should furnish the standard. But when it is said that contracts which affect the public are to be construed most favorably to the public interest, it is obvious that the court is no longer applying a standard of interpretation, that is it is not seeking the intention of the parties. It is attaching a meaning to the contract for another reason than the primary one which is ordinarily controlling. This is true too, when it is said that guarantees are construed in favor of the guarantor. A rule of this latter sort may be called a rule of construction rather than of interpretation. Such a rule of construction can come into play only when the primary standard of interpretation leaves the meaning of the contract ambiguous; for if the application of the ordinary standard of interpretation establishes a clear meaning for the words or symbols, a rule of law which forbids effect being given to that meaning is a part of that substantive law of contracts which comes into play after interpretation and construction have finished their work. A rule of construction as thus understood then is one which in case of ambiguity gives a special meaning to language for reasons other than the normal meaning of the words or the actual or apparent intention of the parties; but such a rule of construction, like a rule of interpretation, concerns itself with the legal meaning of the contract, not with its legal effect after that meaning has been discovered.

§ 603. Possible standards of interpretation.

In order to determine the legal meaning of a contract a "standard of interpretation," to use Wigmore's helpful phrase, must first be established—that is the code by which the meaning of the language and acts of the parties is to be defined. It is useless to talk of the "meaning" of a contract unless it is known whose meaning is sought; and this inquiry, as will be See infra, § 626. • See infra, § 625.

seen, cannot be disposed of by the answer-the meaning of the parties. Wigmore distinguishes four possible standards: "The standard of the community, or popular standard, meaning the common and normal sense of words; the local standard, including the special usages of a religious sect, a body of traders, an alien population, or a local dialect; the mutual standard, covering those meanings which are peculiar to both or all the parties to a transaction, but shared in common by them; and the individual standard of one party to an act, as different from that of the other party or parties, if any. 997

A slightly different further standard may, however, be supposed for a bilateral transaction. This standard is the sense in which the party using the words should reasonably have apprehended that they would be understood by the other party. This is not a mutual standard, nor is it necessarily either the local standard or the individual standard of A or B; though it is only in an exceptional case that the application of these several standards leads to different results. Generally such a standard will give the same result as a mutual standard, but this will not always be true.

§ 604. Different standards of interpretation must be applied to different classes of contracts.

The standard of interpretation adopted by the law depends on the character of the contract under consideration. In one division must be put not only formal contracts such as sealed instruments and negotiable paper, but also contracts where the parties have agreed on a writing or other fixed symbol as a memorial or integration of their agreement. In this class must also be put contracts of which the law requires a written memorandum. Such a memorandum need not necesarily be an integration or memorial of the contract; but the purpose of the law in requiring written evidence can only be satisfied if the same standard is applied to memoranda under the statute as is applicable to written contracts.

In a second division must be put all other contracts. This class will include not only all oral contracts (with the exception of the very unusual one where the parties to the oral agreement "Wigmore on Evidence, § 2461. 8 See supra, § 567.

assent to a particular form of words as the definite and conclusive statement of their agreement), but also any informal contracts of which there may perhaps be written memoranda, where the mutual assent of the parties is simply to the transaction proposed and not also to the writing as a full and final statement of the agreement.

§ 605. Standard of interpretation for informal agreements. In contracts of the second class, the standard of interpretation which the modern law tends to accept, and which is supported by sound principle, is that suggested at the end of §603; namely, the sense in which the party who used the words in question should reasonably have apprehended that the other party would understand them. When A offers his promise for B's and B accepts, A will be bound not only by any meaning which A knows, but also any meaning which A ought to know that B will attach to A's words; and, on the other hand, B's assent though consisting merely of the word "yes," or "I will accept," will bind B to the meaning of the words in which he reasonably should have supposed A used them. It may be

'In Paley's Moral Philosophy, Book III, Part I, Chap. 5, the author deals with this matter from a moral standpoint, and says: "Where the terms of promise admit of more senses than one, the promise is to be performed in that sense in which the promisor apprehended at the time that the promisee received it." But as Pollock points out (Wald's Pollock, 3d ed. 309), this does not exactly hit the mark and Archbishop Whately thus corrected the defect:-"Paley is nearly but not entirely right in the rule he has here laid down. . . . Every assertion, or promise, or declaration of whatever kind, is to be interpreted on the principle that the right meaning of any expression is that which may be fairly presumed to be understood by it." Subject to the qualification hereafter (§ 607,) referred to with reference to written contracts, this seems accurate. In Thoubboron v. Lewis, 43 Mich. 635,

...

638, the court said: "The negotiations being by letter and between business men, and not being conducted in the phraseology of lawyers, or with the care about expression generally obsefved in formal documents, it is not safe and would not be fair to test it by any technical rules. It is a case for equitable interpretation, and the proper course is to look at all the circumstances, and then read the arrangement as the defendants were bound to consider it as understood by the plaintiff." In Clark v. Lillie, 39 Vt. 405, 411, the court said: "The question really reduces itself to this, whether the defendant's liability to the plaintiff is to be governed by what was said between them, or by an arrangement between Sadler and the defendant of which they both neglected to inform the plaintiff and for which neglect the plaintiff was not responsible. The defendant may have supposed that Sadler informed

supposed that A used the words in a sense different from that in which B understood them, but that A had no reason to suppose that his understanding would not also be B's, and B on his part had no reason to suppose that his understanding would not also be A's. In such a case no contract has been made; 10 though if the parties had made a formal contract or agreed upon some memorial, usually a writing, as an integration of their contract, there would have been. The limitation which the law puts, as will hereafter be seen, on the power of the parties to attach any meaning which they choose to words or symbols in a written contract, seems inapplicable to contracts of the class here considered. In such informal contracts any code of signals which the parties may devise seems permissible. Not only may A and B agree that holding up a hand means an agreement to buy or to sell a hundred shares of a particular stock, but it seems that they may agree that in the code which they are using, though it is a code peculiar to themselves, horse shall mean cow, or that buy shall mean sell. To be sure, clear proof will be needed in order to convince a tribunal that such was the agreement of the parties, but there is here what Lord Justice Bowen has called "not so much a canon of construction as a counsel of caution." 11

§ 606. Formal and written contracts may exist though parties attach different meanings to the language.

Where A and B reduce their agreement to writing, even though not such a writing as to create a formal contract,

the plaintiff of this arrangement, but the plaintiff was not at fault for his so thinking. On the contrary the plaintiff informed the defendant of the contract with Sadler, and no such qualification being mentioned in the plaintiff's letter the defendant had reason to understand that it had not been made a part of the contract. The law will presume that the defendant meant what his language by its terms and under the circumstances in which it was used would fairly be understood to mean, and this presumption is a

matter of law and not to be rebutted by proof that he intended something more or different which he made no attempt to express and which the plaintiff neither understood nor had reason to understand." See also Hatch v. Douglas, 48 Conn. 116, 40 Am. Rep. 154; Southern Realty Co. v. Hannon, 89 Neb. 802, 132 N. W. 533; Ballard v. Burton, 64 Vt. 387, 24 Atl. 769, 15 L. R. A. 664.

10 See supra, §§ 94, 95, and infra,

§ 661.

11 Re Jodrell, 44 Ch. D. 590, 614.