Interpretation Of Terms

Question 1

What is the modern day approach to interpreting terms in a contract?

Answer 1

Interpretation takes into account the background knowledge of the parties.

5 principles were created in the CASE: Investors Compensation v West Bromwich Building Society

1. The meaning of the document would convey to a reasonable person having all the background knowledge which would have been available to the parties at the time.
2. Background includes anything which affected the way the language of the document would have been understood by a reasonable person.
3. Excludes admissible background of previous negotiations of parties and declaration of subjective intent.
4. Meaning of the document is not the same as meaning of the words - meaning has to be contextual, rather than using dictionaries
5. The law does not require courts to attribute to the parties their intention not the words “natural and ordinary meaning”

Principles were later simplified and restated in CASE: Marley v Rawlings

Question 2

CASE: Marley v Rawlings

(Principles of interpretation of terms)

Answer 2

1. The natural and ordinary meaning of the words
2. The overall purpose of the document
3. The other provisions in the document
4. The facts known or assumed by the parties at the time of execution of the document
5. Common sense

Question 3

What is The Parol Evidence Rule?

Answer 3

Special instance concerning the interpretation of written contract.

The rule states that, in cases where the contract is wholly contained in writing, evidence other than that which is embodied in the written document cannot be relied upon to change the written contractual terms.