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Contract interpretation

A binding agreement must be met in accordance with its content.

If it is necessary to interpret the agreement as a whole or through specific terms of the agreement, the courts will seek to interpret the term through either:

  1. a purposive approach;
  2. a contextual approach;
  3. the contra proferentem rule; or
  4. the least burdensome outcome test.

A purposive approach means the courts will give effect to what the parties must have intended. The courts will look into what was discussed and exchanged during the contract negotiations, unless this is in conflict with the content of the signed agreement. Applying this principle of interpretation has the effect that Danish law does not recognise the common law rule of parole evidence.

A contextual approach will seek to apply a more literal interpretation.

The contra proferentem rule will often be applied to ambiguous and burdensome terms. The rule requires an interpretation against the party who drafted the term. As most contracts are a result of negotiations between the parties (where both parties have contributed in the drafting), the application of the rule is in practice limited to interpretation of one party's standard terms.

According to the least burdensome test, an ambiguous term will be interpreted in favour of the offeror. Where the contract, for instance, stipulates that the goods cost x kroner per pound, however, the contract is silent on whether this means an English pound (454g) or a Danish pound (500g). Applying the least burdensome test the seller would be able to provide the goods in English pounds.

Courts favour a holistic approach in which all relevant facts are taken into consideration. As such, no one approach is favoured over the other. The applicable approach will depend on the specific facts of the dispute. The only overriding principle in contract interpretation is the principle of best practice, which leaves a wide scope for the courts to exercise discretion.

To the extent that the agreement does not regulate one or more issues, Danish law applies gap-filling rules.

The rules that govern the choice of law in contractual disputes are set out in the Rome Convention. Owing to its reservation on the legal cooperation within the EU, Denmark is not a party to the Rome I-Regulation. As such, the law governing the contract will be that of the country that is most closely connected with the contract, cf. Article 4(1) Rome Convention. The presumption is that the law governing the contract will be the law of the place in which the contract is performed (cf. Article 4(2), or that of the seller's, service provider's or franchisee's habitual residence).