A Critical-Comparative Analysis of the Foundations and Criteria of Contract Interpretation in Iranian Law, English Law, and the UNIDROIT Principles of International Commercial Contracts

Abstract

Contract interpretation is one of the most fundamental issues in contract law, situated at the intersection of party autonomy, legal certainty, contractual justice, and commercial efficiency. The central issue in this field is determining a valid criterion for ascertaining the meaning of a contract and reconstructing the scope of the parties’ obligations. In legal scholarship, this criterion is generally formulated through two principal approaches: the subjective approach, which is based on the parties’ actual intention, and the objective approach, which is based on the apparent terms of the contract and the understanding of a reasonable person. The significance of this issue has increased in contemporary legal systems because contracts are no longer merely simple instruments of exchange; rather, they operate within complex commercial, investment, transportation, technological, and transnational trade relationships. Accordingly, their interpretation cannot be confined solely to traditional rules centered on literal wording or subjective intention. Using a descriptive-analytical method and a critical-comparative approach, the present study examines the theoretical foundations, practical criteria, and evolving trends in contract interpretation within three major legal frameworks: Iranian law, English law, and the UNIDROIT Principles of International Commercial Contracts. The findings indicate that, despite its theoretical reliance on the primacy of intention and its emphasis on the intention to create legal effects and the parties’ actual intention, Iranian law is compelled, at the stages of application and proof, to resort to the apparent meaning of contractual language, custom and usage, contextual indications, and the circumstances surrounding the transaction. By contrast, English law originated in a tradition of objectivism and the primacy of the external manifestation of intention but has progressively evolved toward a form of contextual textualism that takes account of commercial common sense, background knowledge, and the parties’ legitimate expectations. The UNIDROIT Principles likewise adopt a two-stage model: they first regard the parties’ actual common intention as decisive and, where such intention cannot be established, resort to the standard of a reasonable person of the same kind as the parties in the same circumstances. The article ultimately concludes that, notwithstanding their different foundational premises, all three systems are moving toward a form of contextual and functional objectivism, under which the contractual text, the context of formation, trade usages, good faith, and the economic rationale of the contract collectively shape the ultimate meaning and scope of contractual obligations. This convergence may provide a basis for reconsidering the model of contract interpretation in Iranian law and for strengthening the coherence and consistency of judicial practice in contractual disputes.