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Contract interpretation

When interpreting contracts, one should not adhere to the literal meaning of an expression but must determine the intention of the parties and the contract to be understood in line with due commercial practice. In the case of contracts that are only obligatory for one party, if in doubt, it is assumed that the obliged party wanted to assume the lesser rather than the more cumbersome burden. In the case of contracts that are obligatory for both parties, an unclear expression is interpreted to the detriment of the party who used such expression (Section 869 ABGB). A declaration of intent that has been declared to someone else, with his or her consent, as sham, is void. If another transaction is concealed in such a way, it should be assessed in accordance with its true nature. Objection to a sham transaction cannot be raised against a third party who acquired rights in reliance on the declaration.

According to the case law of the Liechtenstein Supreme Court, contractual provisions are to be interpreted (with due caution) in such a way that they do not contain any contradictions and remain as effective as possible ( favor negotii). The intended meaning and purpose – the 'intention to the parties' to be determined by teleological interpretation – rather than the words of a contractual provision are at the forefront of the interpretation.

The interpretation of contracts and written declarations should also take into account the declarations made by the contracting parties occasionally and the resulting intention. The interpretation should be measured against the 'recipient's horizon'. The legal consequences to be derived from the declaration are not judged on the basis of what the declarant wanted to say or what the recipient of the declaration understood by it, but on the basis of an objective assessment on the facts by a bona fide and circumspect person. The concrete circumstances, in particular the business purpose and the interest situation, must be taken into consideration here.

According to Liechtenstein Supreme Court rulings, a mere actual conduct of the contracting parties directed against contractual provisions is insufficient to conclude that the contractual provisions have been amended by implication with the security required by 863 ABGB.

However, when interpreting contracts, it is not strictly the literal meaning of the term that should be held responsible, but the intention of the parties to the contract that must be explored; and the contract must be understood in accordance with the practice of fair dealing.