A Practical Guide To Software License Agreements: Contract Interpretation Principles

A customer that negotiates a software license agreement should understand the basic legal principles that will govern the interpretation of the agreement in the event of a dispute. In most circumstances, the customer's rights and obligations will be defined and limited by the express words of the agreement (including external documents incorporated by reference into the agreement), which will be given their ordinary and natural meaning.

Interpretation Rules

A court will interpret a software license agreement by following generally applicable contract interpretation rules. The fundamental rule is that a written contract will be interpreted to ascertain, objectively, the contracting parties' intention at the time the contract was made based on the words used in the contract construed in light of the surrounding circumstances at the time of contracting. In most cases, the words in a written contract will be given their ordinary and natural meaning, and the court will