Under the plain meaning rule, how is the meaning of a contract determined?

The plain meaning rule in contract interpretation asserts that the meaning of a contract is determined primarily by examining the text itself. This principle suggests that if the language of the contract is clear and unambiguous, it should be understood in its ordinary and literal sense. The idea is that the parties to the contract have agreed to the terms as they are written, and thus the intent of the parties can be derived directly from the document without needing to look beyond its four corners.

This approach emphasizes the importance of the actual words used in the agreement, assuming they convey the intentions of the parties effectively. When the language is straightforward, courts typically do not delve into external sources or evidence, which supports the integrity of agreements and upholds the principle of freedom of contract. By adhering strictly to the text, the plain meaning rule promotes predictability and stability in contractual relationships.

Other methods of interpretation, such as considering extrinsic evidence or oral testimonies, come into play when the language is open to multiple interpretations or is ambiguous. These alternative approaches attempt to clarify the intent behind unclear terms but are not applicable when the document's wording is plain and direct. Thus, relying on the face of the document itself is fundamental to the plain meaning rule in contract law.