27 November 2025
Most business disputes arise from differing interpretations of agreements. That is not surprising. As Paul Scholten already said in 1909: “Words are never clear on their own.”
The interpretation of contracts is an important field of law that has mainly developed through case law. As an entrepreneur, it is important to understand how this works. That is why this blog focuses on the most important judgment in this field: the Haviltex case.
Anyone wishing to interpret a contract correctly cannot ignore the Haviltex ruling. This 1981 judgment remains highly relevant and forms the cornerstone of the interpretative process. All current case law on contract interpretation is based on the so-called Haviltex formula. It is therefore essential to understand this formula before considering the nuances and exceptions established in later case law.
The Haviltex formula reads as follows:
“The question of how the relationship between parties is regulated in a written contract and whether the contract leaves a gap that must be filled, cannot be answered solely on the basis of a purely linguistic interpretation of the contract’s provisions. What matters is the meaning that the parties, in the circumstances of the case, could reasonably attribute to these provisions and what they could reasonably expect from each other in that regard. It may also be relevant which social circles the parties belong to and what legal knowledge such parties may be expected to have.”
In other words: it is not only the literal meaning of the written words that is relevant. What matters is the meaning the parties could reasonably attribute to the wording, and what they could reasonably expect from each other regarding the agreement. All circumstances of the case are relevant, but in this ruling the Supreme Court specifically referred to the social circles to which the parties belong and the legal knowledge that may be expected of them. Reasonableness and fairness always play a role, to a greater or lesser extent, in contract interpretation.
“All circumstances of the case” are therefore relevant – but in practice, that phrase alone is of little help. Experience and case law show that, among others, the following factors can be important:
A detailed contract covering a corporate takeover between two large companies operates in a completely different context than, for example, a loan agreement between two friends. The former is usually carefully drafted with professional advisers; the latter may consist of just a few WhatsApp messages. Large companies require as much certainty as possible in advance, so they can align their operations accordingly. For private individuals, fairness is more important, and there must be more room for a reasonable interpretation. This is why the balance shifts from a predictable linguistic interpretation towards a more flexible, reasonable one.
In both situations, the intentions behind the words of a contract must be further examined. This can be done by looking at communications between the parties before, during and after the contract was formed. Emails from the negotiation stage may, for example, reveal the reasons for choosing or omitting certain wording. Equally, how the parties actually implement the agreement in practice, or what is customary in their sector, may also be relevant.
Contracts are indispensable tools for businesses. At the same time, they can be a potential source of disputes. How contracts should be analysed varies from case to case. The way their wording should be understood depends on all the circumstances.
GMW advocaten regularly advises and litigates on the interpretation of contracts. We can support you both in drafting agreements and in interpreting them afterwards. Do you have any questions? Please feel free to contact one of our lawyers.
