SUPPLEMENTATION OF TERMS IN CONTRACTS

TERMINOLOGICAL ISSUES

While interpretation is the process used in order to discover the meaning of contractual terms, gap filling can be described as the process of completing a contract where the parties have not provided some clause which is necessary for its working. In other words, it is used when the contract contains a gap.

Kornet states that, in a broader sense “contracts can leave gaps in varying degrees, ranging from ambiguity in the terms of a contract due to missing detail to a total failure to deal with a particular situation”. However, in a narrower sense, a gap in the contract exists because contracting parties do not provide any term for a particular contingency and thus completely fail to deal with it in terms of a contract. This is a “true gap”, in a sense that the terms do not address a particular contingency at all.

Generally, the terms of the contract do not address the particular contingency because of a lack of foresight at the time of contracting. The following example may be given: The parties to a construction contract agree on a special interest rate to be paid by the purchaser in the event of delay in payment of the price. Before the beginning of the work, the parties decide to terminate the contract. When the constructor delays restitution of the advance payment, the question of the applicable interest rate arises.

In another example, First National Bank v. Methodist Home, an elderly lady enters a home for the aged, paying a significant sum, to be returned to her “if it should be found advisable to discontinue her stay” during a two-month probation period. Must the home return the money if she dies within this period? In this example, maybe the parties foresaw the problem and preferred not to deal with it.