In disputes, it is common for the contracting parties to have conflicting views on the meaning of a specific contract term. In such cases, the term is interpreted according to established principles of contract interpretation. The primary focus in interpreting a contract is the mutual intent of the parties, and in disputes, evidence is typically presented regarding how the disputed term was addressed during contract negotiations.

If the parties’ intent cannot be clarified, the starting point for interpretation is, according to established contract law principles, the wording of the contract. However, the wording of a contract provision is not interpreted in isolation but as part of the contract in a way that gives the term a meaningful and coherent role in light of the contract’s purpose. The interpretation must also consider the objectives that the specific term is intended to promote.

If the wording of the contract is ambiguous and allows for multiple reasonable interpretations, the contract is generally interpreted against the party who drafted it.

In addition to the main principles mentioned above, contract law includes established principles for specific situations. For example, in interpreting general terms and conditions, established industry practices are taken into account.

The Supreme Court of Finland has recently applied these principles in the following decisions:

Supreme Court Decision KKO 2025:27

In the recent precedent KKO 2025:27, the Supreme Court addressed issues related to contract interpretation and the duty to notify (reclamation). The interpretation question concerned whether the parties to a lease agreement had agreed on a minimum rent or whether the rent was determined based on the actual occupancy rate of the premises.

The Court emphasized that the starting point for interpretation must be the mutual intent of the parties, which is primarily assessed based on the wording of the contract. The wording of the contract document must be examined so that the terms form a coherent and purposeful whole. In addition to the wording, other materials such as contract negotiations and the parties’ subsequent conduct may be used in interpretation. The Court noted that the burden of proof lies with the party invoking an interpretation contrary to the wording, and especially when the wording is clear, the threshold for such burden of proof is high.

In its substantive decision, the Court found that the wording of the lease agreement supported the tenant’s interpretation that the rent was based on the occupancy rate of the accommodation units. The wording created a strong presumption that it reflected the mutual intent of the parties, and the evidence presented did not justify deviating from this interpretation.

Supreme Court Decision KKO 2024:56

In decision KKO 2024:56, the Court examined the interpretation of a liquidated damages clause and a limitation of liability clause. The issue was whether the main contractor’s liability for delays in site handovers to a subcontractor was determined by the agreed liquidated damages clause and related limitation of liability clause, or whether the subcontractor was instead entitled to claim damages for the delay.

The Court emphasized that although a general principle in interpreting limitation of liability clauses is that they should be interpreted narrowly – especially if they are unilaterally drafted and vague or general – the interpretation of such clauses must still follow the general principles of contract interpretation. Therefore, the primary task is to determine the mutual intent of the parties. The wording of the clause is relevant, but it must be examined as part of the contract to ensure a coherent whole. Interpretation is based on an overall assessment, and the application of the narrow interpretation principle depends on the contract as a whole.

In its substantive decision, the Court concluded that based on an overall assessment of the liquidated damages clause, the consequences of the delay were governed by the contract’s provisions on liquidated damages and limitation of liability. The contracting party was not entitled to claim damages instead of the agreed liquidated damages.

How to Minimize Ambiguity in Contract Terms?

The Supreme Court’s decisions do not change established legal practice but highlight that contract interpretation is a matter of overall assessment, and the conduct of the parties during the contractual relationship plays a significant role in interpretation.

To prepare for potential future interpretation disputes, consider the following measures:

1. Aim to draft a clear and detailed written contract to minimize ambiguity.

2. Use established industry-standard contract terms where applicable.

3. Define the hierarchy of contract documents if the agreement consists of multiple documents that may contain conflicting terms.

4. Carefully document contract negotiations so that, in the event of a dispute, you can provide clear evidence of how the content of the contractual term was discussed and understood by the parties.