Interpretation of Terms Flashcards
What are the broader issues at stake for interpretation of terms?
A lot of contractual disputes revolve around the interpretation of terms, for the courts to determine. There is the tension of:
(1) Need for certainty and administrative efficiency
(2) Giving effect to intention of parties
(3) Avoiding unfair results
How do you know all these??
What are the role of precedents for interpreting terms?
Of limited value, contracts and their specific terms differ too much from one another. Precedents only offer value as to what the court’s approach and method of interpretation is
Lord Hoffman’s ICS Principles - what’s the significance?
Confirmation of the UK Courts in adopting the contextual approach of interpretation.
Interpretation is:
- Ascertaining meaning of document, that would be conveyed to a
- Reasonable person
- Having all the background knowledge, which would
- Reasonably have been available to all parties at the time of contract formation
Departure from the literal meaning of words, but trying to ascertain the meaning of the words against relevant background that is reasonably understood to mean - that gives effect to the intention of parties, objectively ascertained.
No need for ambiguity to admit extrinsic evidence
In Zurich, what did SG Courts find significant about Hoffman’s restatement? 3 points.
It is significant because:
(1) Scope and quantity of extrinsic evidence for interpretation has increased
(2) Ambiguity no longer a prerequisite for admissibility of extrinsic evidence
(3) Court may conclude that wrong words or syntax have been used, and court may vary what it deems to be correct (to a limited extent) to give effect to the objectively ascertained intention of parties
In Zurich, what is interpretation?
Essentially, giving effect to the intention of parties as objectively ascertained.
(1) First, court take into account plain language of contract with relevant EE of it context.
(2) If, in light of the context, plain language becomes ambiguous or absurd, court will be entitled to put the term in question and offer an interpretation different from what the plain language prima facie demands.
BASIS IS THAT the common intention of parties may actually not be reflected by the literal meaning of the words used in the contract. Would be contrary to the whole purpose of the contract, if the courts adopt a rigid approach by restricting themselves to the literal meaning of words, consequently defeating the overriding purpose of the contract as intended by the parties.
Therefore, Zurich Interpretations offers more flexibility to the courts in determining the meaning of the contract that would lead to a fair and reasonable interpretation that gives effect to the intentions of contractual parties
How is the thin definition of parole evidence rule and the contextual approach embedded in the Evidence Act?
s 93 and 94 essentially sets out that EE is inadmissible to vary, subtract or add to the contract. Therefore, if it has been proven or admitted that parties intended that all the express terms of their agreement should be as recorded in a particular document(s), EE will be inadmissible because it is irrelevant, if admitted for the purpose of adding, varying, subtracting or contradicting the express terms.
But s94(f) allows for extrinsic material to illuminate the meaning of the language, which is the contextual approach. Therefore, s94(f) will work first, using the contextual approach to show the circumstances in which the document came to be executed, to understand the true effect of the transaction to which the document relates.
Requirements for the admissibility of extrinsic evidence, set out by Hoffman, and endorsed by Zurich
- RELEVANT - affects the way in which language would have been understood by a reasonable man
- REASONABLY AVAILABLE to all contracting parties
- RELATES to a clear and obvious context of the contract. The final constructed meaning on language should not be inconsistent with the context. This third point is important to minimize the uncertainty of the contextual approach, by always giving regard to the importance of the plain language - the threshold requirement that must be fulfilled before EE can be admitted is that a clear and obvious context to the contract must be established before you can really show that a different interpretation of the plain language should be adopted.
Rationale: Want to be careful not to actually let the contract become displaced by EE in an attempt to explain a contrary meaning
6 point summary of Zurich approach to admitting EE
Hint: (NCPSI)
a. nature of document considered
b. 94 (f)
c. parol evidence rule
d. requirements of EE - OBJECTIVE
e. subjective declaration
f. illumination, not variation
(a) Court will take into account essence and attributes of document - treatment of EE at various stages will differ depending on the nature of document. E.g. court will be more reluctant to admit EE to affect standard form contracts and commercial documents
(b) 94(f) first to determine if parties intended to embody entire agreement (entire agreement clause) in the written contract - Applies the NORMAL OBJECTIVE TEST. If determined that the contract is complete on its face, then s 93 and s 94’s parol evidence rule bites - no EE is admissible to contradict, vary, add to or subtract from its terms.
(c) 94(f) aids in the interpretation of written words - this is the modern contextual approach. Ambiguity is not a prerequisite to admit EE.
(d) EE is admissible if relevant, reasonably available to all contracting parties, relates to a clear or obvious context. Principle of objectively ascertaining contractual intentions remain paramount. EE must always go to proof of what parties, from objective viewpoint, ultimately agreed upon - THEREFORE, no EE to support declarations of subjective intent. No rigid prohibition to prevent evidence of previous nego or subsequent conduct, although generally inadmissible in most cases.
(e) Sometimes, EE reveals that the plain language suffers from latent ambiguity. Court may give effect to these alternative interpretations resulting from latent ambiguity, and in arriving at ultimate intepretation of words, court may take into account subjective declarations of intent.
(f) Evidence is used to illuminate, not contradict/vary words. Court can vary the contract to a limited extent, but if a wrong word or syntax was used, then rectification is the more appropriate remedy.
