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The following abstract explains contract construction rules and how they are interpreted by Nevada courts.

AMBIGUOUS CONTRACT

  • If contract is ambiguous, then it will be construed against drafter. Dickinson v. State, Dept. of Wildlife, 110 Nev. 934, 877 P.2d 1059 (1994);
  • Any ambiguity in insurance contract must be interpreted against drafting party and in favor of insured. Farmers Ins. Grp. v. Stonik, 110 Nev. 64, 867 P.2d 389 (1994);
  • Where two interpretations of contract are possible, court will prefer interpretation which gives meaning to both provisions rather than interpretation which renders one of the provisions meaningless. Quirrion v. Sherman, 109 Nev. 62, 846 P.2d 1051 (1993);
  • Court may look to circumstances surrounding execution of contract and subsequent acts or declarations of parties to interpret unclear contract provisions. Trans Western Leasing Corp. v. Corrao Constr. Co., Inc., 98 Nev. 445, 652 P.2d 1181 (1982);
  • In construing ambiguous contract, court should place itself as nearly as possible in situation of parties. Barringer v. Gunderson, 81 Nev. 288, 402 P.2d 470 (1965);
  • The rule that the construction given to a contract by parties should carry great weight applies only to ambiguous contracts and not to contracts which are clear, certain and definite in their terms. Woods v. Bromley, 69 Nev. 96, 241 P.2d 1103 (1952);
  • Where language used in contract is equivocal or ambiguous, subsequent acts or declarations of parties showing practical construction put upon words may be resorted to for purpose of ascertaining their intention. Woods v. Bromley, 69 Nev. 96, 241 P.2d 1103 (1952).

ATTORNEY FEES

Ordinarily, construction of a provision for compensation of an attorney is governed by same rules that generally apply to all contracts.  Bates v. Chronister, 100 Nev. 675, 691 P.2d 865 (1984).

CHOICE OF LAW

  • Under choice-of-law principles, parties are permitted within broad limits to choose law that will determine validity and effect of their contract; however, situs fixed by agreement must have a substantial relation with transaction and agreement must not be contrary to public policy of forum state. Ferdie Sievers and Lake Tahoe Land Co., Inc. v. Diversified Mortg. Inv., 95 Nev. 811, 603 P.2d 270 (1979);
  • Express intention of parties as to applicable law in construction of a contract is controlling if the parties acted in good faith and not to evade the law of the real situs of the contract. Costanzo v. Marine Midland Realty Credit Corp., 101 Nev. 277, 701 P.2d 747 (1985);
  • Harrison v. Rice, 89 Nev. 180, 510 P.2d 633, appeal after research 92 Nev. 645, 555 P.2d 1325 (1973).

CONSTRUCTION BY PARTIES

  • Courts properly consider interpretation which parties themselves, by words or actions, have placed upon contracts. Reno Club v. Young Inv. Co., 64 Nev. 312, 182 P.2d 1011 (1947);
  • In determining meaning of contract, interpretation which parties themselves have placed on it is given great, and often‑times controlling, effect by the courts. Flyge v. Flynn, 63 Nev. 201, 166 P.2d 539 (1946);
  • The rule that the construction given to a contract by parties should carry great weight applies only to ambiguous contracts and not to contracts which are clear, certain and definite in their terms. Woods v. Bromley, 69 Nev. 96, 241 P.2d 1103 (1952).

CONSTRUCTION TO GIVE VALIDITY

  • A contract should be construed, if possible and legally, to effectuate valid contractual relations, rather than in a manner which would render the contract invalid, or render performance impossible. Reno Club v. Young Inv. Co., 64 Nev. 312, 182 P.2d 1011 (1947);
  • Where two interpretations of contract are possible, court will prefer interpretation which gives meaning to both provisions rather than interpretation which renders one of the provisions meaningless. Quirrion v. Sherman, 109 Nev. 62, 846 P.2d 1051 (1993);
  • Contract should be construed if logically and legally permissible so as to effectuate valid contractual relations rather than in manner which would render agreement invalid or render performance impossible. Mohr Park Manor, Inc. v. Mohr, 83 Nev. 107, 424 P.2d 101 (1967);
  • In construing contracts, every word must be given effect if at all possible. Royal Indem. Co. v. Special Service Supply Co., 82 Nev. 148, 413 P.2d 500 (1966); Contractual provisions should be harmonized whenever possible and construed to reach reasonable solution.  Eversole v. Sunrise Villas VIII Homeowners Ass’n, 112 Nev. 1255, 925 P.2d 505 (1996).

ENFORCE AS WRITTEN

  • When a party makes a contract and reduces it to writing, he must abide by its terms as plainly stated therein. Chiquita Mining Co. V. Fairbanks, Morse & Co., 60 Nev. 142, 104 P.2d 191 (1940);
  • Contracts are construed from written language and enforced as written. Ellison v. California State Auto Ass’n, 106 Nev. 601, 797 P.2d 975 (1990);
  • Where a document is clear and unambiguous, the court must construe it from the language therein. Southern Trust Mortg. Co. v. K&B Door Co., Inc., 104 Nev. 564, 763 P.2d 353 (1988).

EXPRESSION OF ONE THING EXCLUDES ANOTHER

The maxim “expressio unius est exclusio alterius” (a Latin phrase that means that the express mention of one thing excludes all others) is applied in the construction of conveyances and other contracts.  Flyge v. Flynn, 63 Nev. 201, 166 P.2d 539 (1946).

FAIR AND REASONABLE

  • Interpretation which results in a fair and reasonable contract is preferable to one that results in a harsh and unreasonable contract. Dickinson v. State, Dept. of Wildlife, 110 Nev. 934, 877 P.2d 1059 (1994);
  • A contract should be given a reasonable and fair interpretation. Reno Club v. Young Inv. Co., 64 Nev. 312, 182 P.2d 1011 (1947); Contractual provisions should be harmonized whenever possible and construed to reach a reasonable solution.  Eversole v. Sunrise Villas VIII Homeowners Ass’n, 112 Nev. 1255, 925 P.2d 505 (1996);
  • The word “will” when used as an auxiliary verb is sometimes used in the present tense. Milner v. Dudrey, 77 Nev. 256, 362 P.2d 439 (1961).

INCORPORATION BY REFERENCE

  • Where reference in a contract to “plans and specifications” indicates an intention to incorporate them generally, such reference becomes a part of the contract for all purposes. Lincoln Welding Works, Inc. v. Ramirez, 98 Nev. 342, 647 P.2d 381 (1982);
  • If plans and specifications are by their express terms made a part of the contract, the terms of the plans and specifications will control with the same force as though incorporated in the very contract itself. Lincoln Welding Works, Inc. v. Ramirez, 98 Nev. 342, 647 P.2d 381 (1982);
  • Two separate writings may be sufficiently connected by internal evidence without any express words of reference of one to the other and fact that they refer to same transaction and state terms thereof may appear from character of subject matter and from nature of terms. Haspray v. Pasarelli, 79 Nev. 203, 380 P.2d 919 (1963);
  • The doctrine of incorporation by implied reference is accepted in Nevada. Haspray v. Pasarelli, 79 Nev. 203, 380 P.2d 919 (1963);
  • Writing referred to in contract for particular and specified purpose becomes part of contract for such specified purpose only. Orleans Hornsilver Mining Co. v. Le Champ D’Or French Gold Mining Co., 52 Nev. 92, 284 P.307 (1930).

INTENTIONS OF PARTIES

  • In interpreting a contract, the court must effectuate the intent of the parties, which may be determined in light of surrounding circumstances if it is not clear from contract itself. NGA #2 Ltd. Liability Co. v. Rains, 113 Nev. 1151, 946 P.2d 163 (1997);
  • In interpreting contract, court should ascertain intention of parties from language employed as applied to subject matter in light of surrounding circumstances. Kroeger v. King, 103 Nev. 536, 746 P.2d 630 (1987);
  • The prime rule in construing contracts is to ascertain intention of the parties. Barringer v. Gunderson, 81 Nev. 288, 402 P.2d 470 (1965);
  • If intention of parties is clear from instrument itself, contract requires no construction. Barringer v. Gunderson, 81 Nev. 288, 402 P.2d 470 (1965);
  • If intention of parties is not clear from instrument itself, it may be ascertained from language of agreement considered in light of surrounding circumstances. Barringer v. Gunderson, 81 Nev. 288, 402 P.2d 470 (1965);
  • The intention of the parties to a contract controls its interpretation. Orleans Hornsilver Mining Co. v. Le Champ D’Or French Gold Mining Co., 52 Nev. 92, 284 P.307 (1930).

INDEFINITE QUANTITY

Construction of “about” or “more or less,” in contracts, depends upon whether parties intended number as estimate of particular class or as warranty.  Holland v. Rock, 50 Nev. 340, 259 P. 415 (1927).

MEANING OF WORDS

  • Words must be given their plain, ordinary and popular meaning. Tompkins v. Buttrum Constr. Co. of Nevada, 99 Nev. 142, 659 P.2d 865 (1983);
  • In its interpretation of a contract, trial court may examine both words and actions of parties. Fox v. First W. Sav. & Loan Ass’n, 86 Nev. 469, 470 P.2d 424 (1970).

MISTAKES IN WRITING GRAMMAR, OR SPELLING

  • The word “will” when used as an auxiliary verb is sometimes used in the present tense. Milner v. Dudrey, 77 Nev. 256, 362 P.2d 439 (1961);
  • The use of the future tense may under some circumstances constitute present action. Milner v. Dudrey, 77 Nev. 256, 362 P.2d 439 (1961).

NO ABSURD RESULT

A contract should not be construed so as to lead to an absurd result.  Reno Club v. Young Inv. Co., 64 Nev. 312, 182 P.2d 1011 (1947).

OFFICER AS GUARANTOR

It is incumbent upon one seeking to extend personal liability to corporate officer for corporate debt, to show by preponderance of evidence, that officer intended to be personally bound, and that creditor was looking to officer as guarantor of the debt.  Trident Constr. Corp. v. West Elect., Inc., 105 Nev. 423, 776 P.2d 1239 (1989).

PRESUMPTIONS RE: CONTRACT REMEDY

When parties to a contract foresee a condition which may develop, and provide in their contract a remedy for the happening of that condition, the presumption is that the parties intended the prescribed remedy as the sole remedy for that condition.  Gilman v. Gilman, 114 Nev. 416, 956 P.2d 761 (1998).

PURPOSE OF CONTRACT

  • Employment contracts, like other agreements, should be construed to give effect not only to intention of parties as demonstrated by language used, but to purpose to be accomplished and circumstances surrounding execution of agreement. Shoen v. Amerco, Inc., 111 Nev. 735, 896 P.2d 469 (1995);
  • Court called upon to interpret contract is not limited to express terms of written contract, and may instead examine circumstances surrounding parties’ agreement in order to determine true mutual intentions of parties. Hilton Hotels Corp. v. Butch Lewis Prod., Inc., 107 Nev. 226, 808 P.2d 919 (1991);
  • In its interpretation of a contract, trial court may examine both words and actions of parties. Fox v. First W. Sav. & Loan Ass’n, 86 Nev. 469, 470 P.2d 424 (1970).

REWRITE

  • Court will not rewrite contract provisions that are otherwise unambiguous. Farmers Ins. Group v. Stonik, 110 Nev. 64, 867 P.2d 389 (1994);
  • In interpreting an agreement, court may not modify it or create new or different one. Mohr Park Manor, Inc. v. Mohr, 83 Nev. 107, 424 P.2d 101 (1967);
  • Court is not at liberty to revise agreement while professing to construe it. Mohr Park Manor, Inc. v. Mohr, 83 Nev. 107, 424 P.2d 101 (1967);
  • Courts are bound by language which is clear and free from ambiguity and cannot, using guise of interpretation, distort plain meaning of agreement. Watson v. Watson, 95 Nev. 495, 596 P.2d 507 (1979);
  • The court may not create for the parties a new contract which they have not created or intended themselves. Reno Club v. Young Inv. Co., 64 Nev. 312, 182 P.2d 1011 (1947);
  • The court may not create for the parties a new contract which they have not created or intended themselves. Flyge v. Flynn, 63 Nev. 201, 166 P.2d 539 (1946);
  • A Court has no power to create a new contract for the parties which they have not created nor intended themselves. Old Aztec Mine, Inc. v. Brown, 97 Nev. 49, 623 P.2d 981 (1981).
  • Although a court in Nevada has the power to interpret agreements and contracts as written, it does not have the power to rewrite or alter their terms. As the Nevada Supreme Court explained in Mohr Park Manor, Inc. v. Mohr, 83 Nev. 107, 424 P.2d 101 (1967):  In interpreting an agreement a court may not modify it or create a new or different one.  A court is not at liberty to revise an agreement while professing to construe it.  Reno Club, Inc. v. Young Investment Co., 64 Nev. 312, 323-324, 182 P.2d 1011, 173 A.L.R. 1145 (1947).  On the other hand, contract should be construed, if logically and legally permissible, so as to effectuate valid legal contractual relations, rather than in a manner which would render the agreement invalid, or render performance impossible. See also Traffic Control Serv., Inc. v. United Rental Nw., Inc., 87 P.3d 1054, (2004) (“We have previously stated that the court should not revise a contract under the guise of construing it”); Estate of Travis v. Special Admin., 102 Nev. 433, 434, 725 P.2d 570, 571 (1986) (“The district court was without authority to alter the terms of the agreement.”);  Old Aztec Mine, Inc. v. Brown, 97 Nev. 49, 52, 623 P.2d 981 (1981) (“Under well-settled rules of contract construction a court has no power to create a new contract for the parties which they have not created or intended themselves.”).

TIME FOR PERFORMANCE

  • When a contract does not specify a time within which performance must be rendered, what constitutes a reasonable period of time for performance must be determined from the nature of the agreement and the particular circumstance involved. Soper v. Means, 111 Nev. 1290, 903 P.2d 222 (1995);
  • Where option agreement did not specify length of time within which escrow should close, it was within discretion of district court to set reasonable time within which escrow should have closed, and, under circumstances of case, six-month escrow for conveyance of magnitude of conveyance involved in case was not unreasonable, and monthly payments toward purchase price made prior to date set for closing of escrow were properly applied toward rent due for such months. Summa Corp. v. Richardson, 95 Nev. 399, 596 P.2d 208 (1979);
  • Where agreement does not contain a provision as to the period of duration, court will imply a reasonable time. Tavel v. Olsson, 91 Nev. 359, 535 P.2d 1287 (1975);
  • In determining what constitutes reasonable period of time to be implied in terms of an agreement trial court makes its determination from the nature of the contract and the particular circumstances involved. Tavel v. Olsson, 91 Nev. 359, 535 P.2d 1287 (1975).

UNAMBIGUOUS CONTRACT

  • Where language in a document is clear and unambiguous on its face, the court must construe it based on this plain language. Love v. Love, 114 Nev. 572, 959 P.2d 523 (1998);
  • Questions of contract construction, in the absence of ambiguity or other factual issues, are suitable for determination by summary judgment. Nelson v. California State Auto Ass’n Inter‑Insurance Bureau, 114 Nev. 345, 956 P.2d 803 (1998);
  • Unambiguous contract is construed from language of document. Chwialkowski v. Sachs, 108 Nev. 404, 834 P.2d 405 (1992);
  • Meaning and legal effect of unambiguous contract are generally questions of law but parol evidence may be considered to determine the true intent of the parties when contract is ambiguous. Crank v. Nevada Indus. Com’n, 100 Nev. 80, 675 P.2d 413 (1984);
  • When a document is clear and unambiguous on its face, court must construe it from language therein. Renshaw v. Renshaw, 96 Nev. 541, 611, P.2d 1070 (1980);
  • Unambiguous contract cannot be distorted into meaning anything other than what language implies. Talbot v. Nevada Fire Ins. Co., 52 Nev. 145, 283 P.404 (1930);
  • Where document is clear and unambiguous, court must construe it from the language therein. Southern Trust Mortg. Co. v. K&B Door Co., Inc., 104 Nev. 564, 763 P.2d 353 (1988).

 

See elements for other claims at the Nevada Law Library

About the Author

Jay Young is a Las Vegas, Nevada attorney. His practice focuses on business law, business litigation, and acting as an Arbitrator and Mediator. Peers have named him an AV-Rated Lawyer, Best Lawyers, a Top 100 Super Lawyers in the Mountain States multiple years, and to the Legal Elite and Top Lawyers lists for many years. Mr. Young has been appointed a part time Judge, a Special Master to the Clark County, Nevada Business Court, as an arbitrator by the Nevada Supreme Court. He has been appointed as an arbitrator or mediator of well over 250 legal disputes from business disputes to personal injury matters. He has been named Best Lawyers for Arbitration. Mr. Young is a respected author of ten books, including A Litigator’s Guide to Federal Evidentiary Objections, A Litigator’s Guide to the Federal Rules of Evidence, and the Federal Court Civil Litigation Checklist.
Mr. Young can be reached at 702.667.4868 or at jay@h2law.com.