1- McLauchlen on Construction Flashcards
Why is the certainty of the judicial approach to construction of commercial contracts important?
Contractual interpretation disputes often hinge huge sums of money on the slightest difference in interpretation, upon which there are many judicial disagreements and dissents.
This may make English law unattractive to parties if they are unsure how a court will decide their case.
Traditional Textual Approach?
2 stage interpretation.
1. Textual- if the actual words do not give rise to ambiguity/absurdity/irrationality/commercial nonsense there is no need to move onto a contextual approach, as the words will be given their ordinary meaning.
- If it is argued that parties chose the wrong words they should seek rectification. The court should not construe new words.
- Only where the words are ambiguous or their application to the facts is uncertain is it appropriate to determine which of the competing interpretations is more commercial, based on the background.
- May have been disposed of my ICS and Manni, but unlikely in the view of more recent cases. BUT also difficult to see how it has been completely reinstated, because no court has questioned Hoffman’s first principle (that the background and words should be taken together)
Contextual Approach?
Hoffman’s creation.
1 stage- the text and context are taken together. The meaning of the document is the meaning it would convey to a reasonable person with all the background knowledge reasonable available to parties at the time of contracting, in view of the fact that meaning is not always the same as words.
Issues with Hoffman’s contextual approach?
- Unclear whether the meaning the words would convey to a ‘reasonable person’ is a person with business common sense, or an ordinary person.
- Pre-contractual negotiations are exempt from the background. This rule is subject to so many exceptions it is questionable whether substance remains.
i. e. Charbrook- this rule does not exclude evidence of prior negotiations to establish that a fact which may be relevant background information was known to the parties - Confuses interpretation and rectification.
Marley v Rawlings HOL
Neuberger:
1. The fact that Hoffman said language could be corrected by ‘interpretation’ is ‘controversial’.
- Confuses the difference between interpretation and rectification.
- If the court interprets that a contract has a particular meaning then this means the document has always had this meaning.
- If a court rectifies a contract, then the rectified document has a different meaning from what it appears on its face.
Richard Buxton
Hoffman’s analysis of interpretation vs rectification went too far, especially with his Charbook ‘red ink’ comment.
Hoffman’s 1-3rd principles are a statement of the orthodox approach (questionable), but 4 and 5 belong in rectification.
Neuberger approved of this comment in Marley.
McLaughlen on Marley v Rawlings
- If Neuberger in Marley is correct, then Hoffman’s approach may not survive because it is not possible to remove principles 4 and 5 and interpretation, as H regarded them as a natural extrapolation from his first principle.
- BUT it is not true that courts can never correct mistakes during interpretation. Even the textual approach allows this the words used give rise to a manifest absurdity.
- H is not suggesting that words used are unimportant. He accepted that in most cases interpretation issues are resolvable by reading the words as they are.
Evaluation of Rainy Sky (2011) SC?
- Clarke seems to endorse the textual approach- he took the words on their meaning, but because there were two possible interpretations, said the court could prefer the most commercial one.
- He said that if language is unambiguous it should be applied no matter how unreasonable it is- inconsistent with ICS.
- BUT he also said ‘the notion of words having a natural meaning is not a helpful one’ because words are so sensitive to context that the natural meaning of words in one sentence might be different to the meaning in another.
- ‘natural meaning’ is most commonly understood in judicial circles to mean in the sense of ICS principle 5 (e.g Prenn v Simmonds- Wilberforce).
- If Clarke was trying to marry the textual and contextual approaches he could have done this much more clearly by affirming Hoffman’s statement that ordinarily the reasonable person with knowledge of the background will understand the parties to have meant what they said according to ordinary usage and the court’s will not lightly accept that words and grammar have not been used in their conventional sense. This would have avoided the conceptual uncertainty from trying to marry Hoffman with a consideration of ambiguity.
Marley v Rawlings- Neuberger on judge’s ability to judge CCS
A judge who is normally fairly remote in business matters may not be good at identifying the commercial common sense of a conclusion. There is substantial danger he will asses it by referring to the circumstances.
Many other judges have said similar things.
McLaughlin on judge’s ability to judge CCS
Judges are, in many areas of law, called on to make determinations on equally broad standards where they are unfamiliar with or have no experience in. So judicial statements like Neuberger’s are simply an attempt to halt the contextual approach.
McLaughlin’s Suggested Approach?
- Hoffman’s first principle is correct. It has been universally accepted. Thus, the plain meaning rule must be wrong.
- Because interpretation disputes are fact specific the way meaning is conveyed to a reasonable person will depend on language factors, such as quality of language used, formality of the document etc. So the required degree of reasonableness should be assessed with regard to these factors.
- So both textual and contextual are necessary and must be balanced.
- It should be remembered that the fact a contract may appear unduly favourable to one party is not sufficient reason for supposing it does not mean what it says- Hoffman in Charbrook.
- He no doubt had in mind that even experienced commercial plays may agreements that seems to make no commercial sense, but these agreements do still mean what they say, so the court should not intervene.
Arnold v Briton?
Is another striking example of judicial disagreement in this area. Neuberger and Cranworth dissented.
Shows a more conservative approach.
