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Georgia Rules of Construction Govern Contract Disputes

INTRODUCTION

Many times, disputes over large amounts of money are subject to a contract that is not well written and which is unclear and ambiguous. The question then becomes, how will the Court construe the contract clauses which could decide the lawsuit in favor of the plaintiff or defendant.

APPLICABLE LAW

In Georgia, the construction of a contract is a question of law for the court. O.C.G.A. § 13-2-1. (1) If the contract language is unambiguous, those terms are enforced, (2) if the language is ambiguous, the Court applies the rules of construction to resolve the ambiguity, and (3) only if an ambiguity remains is the meaning of the contract to be determined but the jury. Schwartz v. Harris Waste Mgt. Group, Inc. 516 S.E.2d 371 (Ga. App. 1999). Under the second step of this process, even ambiguous contracts are to be construed by the court and this is so even when the contract is difficult to construe.

Ambiguity exists when the language may be understood in more than one way. Language that is unambiguous will not be construed as ambiguous based on extrinsic circumstances. Walton v. Datry, 363 S.E.2d 295 (Ga. App. 1987). Where the language of the contract unambiguous, and no construction is necessary or even permitted, the contractual language must be afforded its literal meaning and it is the duty of the court to enforce the contract as written. First Data POS, Inc. Willis 546 S.E.2d 781 (Ga. 2001).

O.C.G.A. § 13-2-2 sets out 9 non-exclusive rules of construction, of which the following are relevant:

  1. Parol evidence is inadmissible to add to, take from, or vary a written contract, but if there is an ambiguity, it may be explained by parol evidence;
  2. words bear their usual and common meaning;
  3. the custom of any business or trade shall e binding only when it is of such universal practice as to just the conclusion that it became, by implication, a part of the contract;
  4. the construction which will uphold a contract in whole or in part is preferred;
  5. An ambiguous contract is construed against the party preparing it;
  6. the rules of grammatical construction usually govern.

One important non-statutory rule of construction is: Where the purpose of a contract would be defeated by one interpretation of a clause but would be given effect by another interpretation, the meaning ascribed to the clause will be the one that gives effect to the main apparent purpose of the contract. Wright v. Piedmont Eng. & Constr. Co. 126 S.E.2d 865 (Ga. App. 1962).

Article 2 of the UCC recognizes and exception to the parole evidence rule in that it allows an agreement to be explained or supplemented (but not contradicted by) course of dealing between the parties and O.C.G.A. §11-2-208 states that express terms, course of performance, and course of dealing or usage shall construed whenever reasonable as consistent with each other. Georgia business case law follows the UCC.

APPLICATION OF RULES

If the contract terms are unambiguous, those terms are enforced. If the court determines that the contract language is ambiguous (ambiguity exists when the language may be understood in more than one way), the rules of construction work as follows:

  • If there is an ambiguity, it may be explained by parol evidence;
  • If there is an ambiguity, an ambiguous contract is construed against the party preparing it;
  • The UCC exceptions should allow the introduction of additional evidence explain and ambiguous term.

Every case is different. Many Georgia commission dispute cases involve complex fact patterns which, in the end, make construction of the contract language extremely important to the litigants and many cases turn on the construction of ambiguous terms in a contract after the facts are applied to the terms of the contract, as defined by the court.

Robert J. Fleming has been handling complex business cases, dental malpractice, bus accidents, car accident cases and premises injury cases for individuals and families who have been harmed, injured or died as a result of the carelessness or negligence of another for more than 20 years. He practices in and around the Atlanta, Georgia area including handling lawsuits in Fulton, DeKalb, Clayton, Gwinnett, Cobb and other counties and nearby cities including Alpharetta, Austell, Avondale Estates, Chamblee, College Park, Conyers, Duluth, Decatur, Doraville, Hapeville, Johns Creek, Jonesboro, Lawrenceville, Norcross, Peachtree City, Riverdale, Roswell, Sandy Springs, Stone Mountain, and Smyrna. If you have been seriously injured and would like discuss your case in complete confidence, contact Robert J. Fleming directly on (404) 525-5150 or contact us online.