Contract Cases: Interpretation Flashcards
Central authority for the modern approach to interpretation: Facts.
ICS: the main takeway is the courts used corrective interpretation on a term which was not absurd/ambiguous. Just needs clear context around it for it to make sense.
How unreasonable does ‘commercial common sense’ need to be and what effects will it have?
Rainy Sky SA v Kookmin: it does not need to be extremely implausible; the court will favour the approach which is more commercially common sense if the language is ambiguous. However, where the language is unambiguous the courts must apply it (Cf corrective interpretation)
Arnold v Britten: but cf this case, which suggests that the court should not be too hasty in finding uncertainty.
Rowing back the effect of ICS?
Arnold v Britten: “the reliance placed in some cases on commercial common sense and surrounding circumstances… should not be invoked to undervalue the importance of the language of the provision which is to be construed.”
The words used have been given primacy again because they directly reflect what the parties have chosen, unlike commercial common sense or the context of the case. Also note that there is proportionality between ambiguity, unreasonableness, and sophistication of the parties.
Limits on the factual matrix. When will the court refuse to add facts to what some have called a seemingly unlimited appreciation of background material?
Lloyd’s v Lloyd’s: when there was no way the parties could have possible contemplated the development;
Sigma: the information was not available to the parties so could not form the background matrix.
Limits on Corrective Interpretation
Scottish Widows Association: the courts will only apply the corrective intepretation rule when it is a linguistic or error in syntax. Further, it must be clear what the parties had actually intended to write.
Littman v Aspen Oil: however, in this instance the landlrod inserted the wrong word and this was corrected, even though it was not a linguistic or syntax error.
Application of Corrective Interpretation
Pink Floyd Music: the court found the use of the words ‘Records’ was a mistake, and further that for the purposes of a corrective interpretation the word used would have to be ‘nonsensical’.
What happens when there is no ambiguity?
Proctor and Gamble: when there is no ambiguity the courts must uphold the contract, even where it would produce an unfair result. The parties must continue to have the freedom to make a bad contract.
When will the court decline to carry out corrective interpretation?
Fairstate v General Enterprises: if the text is so mangled that a plausible reading cannot be given to it then the courts will not apply the technique.
The traditional view as to intperetation and the subsequent development of this view.
Lovell v Christmas & Wall; Prenn v Simmonds (Lord Wilberforce)
“It is the duty of the court… to construe the document according to the ordinary grammatical meaning of the words used therein, and without reference to anything which has previously passed between the parties to it.”
Central authority for the modern approach to interpretation: Factual Matrix
ICS: this includes everything which would have been reasonably available to the parties. background, genesis, markets etc. However, it also includes an exclusionary rule would expunges any negotiations.
Recent authority on effect of Arnold on ICS
Wood v Selico
Central authority for the modern approach to interpretation: Business Common Sense
ICS: when the court is presented with multiple interpretations, it is entitled to favour the one which is closest to business common sense.
Central authority for the modern approach to interpretation: Corrective Intepretation
ICS; City Alliance; Pink Floyd; Kookmin all suggest there is a requirement of absurdity before a corrective interpretation will be taken. Note though that Lord Grabiner disagrees and suggests that a corrective intepretation can be taken if it is clear from the factual matrix. The rule it must be absurd is simply a response to the court being invited to find commercial absurdity by itself, where it is obvious circumpection is beneficial.
Recent authority on effect of Arnold on ICS
Wood v Capita: emphasises iterative process where the court gives equal weight to the commercial context and the meaning of the words themselves. Notably, this does not resolve the inherent conflict between a crystal clear term which is utterly nonsensical commercially.
Evangelou v McNicol: the effect of Arnold is that it has adjusted the balance of weight between the words and the context.
Recent authority on effect of Arnold on ICS
Wood v Capita: emphasises iterative process where the court gives equal weight to the commercial context and the meaning of the words themselves. Notably, this does not resolve the inherent conflict between a crystal clear term which is utterly nonsensical commercially.
Evangelou v McNicol: the effect of Arnold is that it has readjusted the weight which is to be attribtued to the actual words of the contract.
