In this case it is necessary to interpret the provision of plaintiff’s “Commission Schedule” which reads as follows:
“In the event the loss ratio on the business produced by the General Agent exceeds 50 % on the basis of incurred losses to earned premiums, the commission scale will be reduced by 5% on both new and renewal business.”
*403Plaintiff’s loss ratio rose to a level above 50% in November 1969. Until that month, he had been receiving commissions from defendant at a rate of 4% of renewal premiums. Plaintiff contends that under this provision of the contract, defendant should have deducted from his commissions an amount equal to 5% of the commissions. In other words, his commissions should have been reduced by 5% of 4% — that is, by 0.2% — and defendant should have continued to pay him commissions at a rate of 3.8 %.
Defendant contends that when plaintiff’s loss ratio rose above 50%, his commissions were to be reduced by an amount equal to 5 % of the premiums, not 5 % of the commissions. Since plaintiff had been receiving commissions at a rate of 4% of the premiums, a deduction of 5% of the premiums would leave him with no commissions at all. Accordingly, defendant paid plaintiff no commissions after November 1969.
We hold that the correct interpretation of the contract is the interpretation proposed by plaintiff.
First, plaintiff’s interpretation is supported by an examination of the contract as a whole. There are two penalty provisions in the contract between plaintiff and defendant. One of these is the provision quoted above, requiring a 5 % reduction in commissions when plaintiff’s loss ratio exceeds 50%. The other penalty provision is found in Article XVII of the “General Agent’s Agreement.” Article XVII provides that whenever the contract between the plaintiff and defendant is terminated by either party, plaintiff’s commissions are to be reduced by 20%. In March 1968, when defendant dismissed plaintiff from his positions as state manager and general agent, this provision was put into operation. Prior to March 1968, plaintiff had been receiving commissions at a rate of 5% of renewal premiums. After March 1968, defendant continued to pay commissions to plaintiff, but at a rate of 4% rather than 5%. In other words, plaintiff’s commissions were reduced by an amount equal to 20% of the commissions, not 20% of the premiums. This is the interpretation placed on one penalty provision of the contract by the defendant insurance company and accepted by the plaintiff. The parties having adopted this interpretation, the other penalty provision of the contract should be construed in the same way; it, too, should call for a reduction in plaintiff’s compensation to be measured by a percentage of his commissions. Preyer v. Parker, 257 N.C. 440, 125 S.E. 2d 916; Construction *404 Co. v. Crain and Denbo, Inc., 256 N.C. 110, 123 S.E. 2d 590; 3 Corbin, Contracts, § 558. A contract should be interpreted as a whole, and similar provisions of the contract should be given similar effects. Yates v. Brown, 275 N.C. 634, 170 S.E. 2d 477; 3 Corbin, supra, § 549; cf. Trust Co. v. Bass, 265 N.C. 218, 143 S.E. 2d 689.
Second, plaintiff’s proposed construction of the 5% penalty-provision is consistent with the purpose of the provision. Defendant was interested in keeping its loss ratio as low as possible, and thus increasing its profits. To encourage its agents to sell insurance to persons in good health, defendant inserted into its agents’ contracts a provision calling for a reduction in commissions if the agent’s loss ratio rose above 50%. But plaintiff did not sell any insurance policies for defendant; it was the local agents whom plaintiff recruited and trained that sold insurance policies to individual policyholders. It does not seem reasonable that the parties contemplated that the state manager be deprived of all his commissions because local agents sold policies to poor insurance risks. A contract should be interpreted in accordance with its purpose. Peaseley v. Coke Co., 282 N.C. 585, 194 S.E. 2d 133; Bank v. Corbett, 271 N.C. 444, 156 S.E. 2d 835; Starling v. Taylor, 1 N.C. App. 287, 161 S.E. 2d 204; 3 Corbin, supra, § 545.
The judgment of the Superior Court is
Affirmed.
Judges Britt and Morris concur.