When a contract says “this Agreement shall be construed in accordance with the laws of the State of Illinois,” or that a provision “shall not be construed to limit” a party’s rights, it is invoking a specific legal concept: the power of interpretation. Construed is one of the most frequently used words in commercial contracts, and understanding what it means—and why it matters—helps you draft and negotiate agreements with greater precision.

Construed Definition in Law

To construe means to interpret or determine the meaning of legal language. “Construed” is the past tense, appearing in contract provisions that direct how specific language should be understood—by the parties, by arbitrators, or by courts.

The act of construing a contract involves applying legal rules of construction (interpretive rules) to determine what the parties intended. Courts construe contracts when the parties disagree about meaning.

Common “Shall Be Construed” Constructions

Governing Law Clauses

“This Agreement shall be construed in accordance with the laws of the State of Illinois, without regard to its conflict of law provisions.”

This clause directs courts to apply Illinois law when interpreting the contract, even if the dispute arises in another jurisdiction. The “without regard to conflict of law provisions” language prevents a court from applying another state’s law because Illinois choice-of-law rules would point there.

Limitation Clauses

“Nothing in this Agreement shall be construed to limit either party’s rights under applicable law.”

This clause instructs readers not to interpret the contract as waiving statutory or common law rights that exist independently of the agreement.

Contra Proferentem Direction

Some contracts include clauses that override the default contra proferentem rule: “This Agreement shall not be construed against either party as drafter.” This prevents courts from applying the default rule that ambiguous language is construed against the party who drafted it.

Rules of Contract Construction Under Illinois Law

Illinois courts apply several well-established rules when construing contracts:

• Plain meaning rule: Unambiguous contract language is given its plain, ordinary meaning without reference to extrinsic evidence.
• Four corners rule: Courts look to the contract document itself, not to outside evidence, to determine meaning—unless the contract is ambiguous on its face.
• Specific over general: Specific provisions control over general provisions when they conflict.
• Contra proferentem: Ambiguous language is construed against the party who drafted it.
• Harmonious construction: Courts try to give effect to all provisions, avoiding interpretations that render any clause surplusage or meaningless.
• Course of dealing / course of performance: How the parties have actually performed under the contract informs interpretation of ambiguous terms.

Construed vs. Interpreted: Is There a Difference?

In practice, “construed” and “interpreted” are often used interchangeably in contracts. Some legal scholars draw a distinction: “interpretation” determines the meaning of language, while “construction” applies that meaning to the legal consequences. Most courts and practitioners treat the terms as synonyms in contract disputes.

Why “Shall Be Construed” Language Matters in Startup Contracts

Construal direction matters when:

• You operate across multiple states and need predictability about which state’s law governs
• Your contract includes broad limitation clauses that could be read to waive statutory rights
• Your IP license uses “construed broadly” or “construed narrowly” to control the scope of the grant
• You’re the drafter and want to protect against contra proferentem arguments

FAQ: Construed in Contract Law

Can parties agree to override Illinois rules of construction?

Yes, within limits. Parties can waive contra proferentem, agree on a specific interpretive framework, or designate another state’s law as governing. They generally cannot contract around fundamental Illinois public policy rules.

What happens when “construed” language conflicts with contract facts?

Construal direction governs interpretation methodology, not the underlying facts. If a contract says it “shall be construed strictly,” that guides how a court applies ambiguous language—it doesn’t change what actually happened between the parties.

Fitter Law helps Illinois startups draft and review contracts with clear governing law clauses, appropriate construction language, and enforceable limitation provisions. Learn about our contract services.