Modern Approach to Interpretation

Question 1

What are the two main points to the modern approach to contract interpretation

Answer 1

Admissibility/context:
* Textual context - other clauses in contract
* Extratextual context - things outside of the contract (prior negotiations, subsequent conduct)

Commercial sense:
* Most of the time we expect that commercial entities would enter into reasonably symmetrical bargains

Question 2

Step 1 of modern approach from Bathurst

Answer 2

Start with plain meaning (FirmPI) - natural and ordinary meaning to the words. Clearer words harder to depart from (Wood v Capita)

Question 3

Step 2 of modern approach from Bathurst

Answer 3

Then wider context (Firm PI) Is contextual evidence relevant for showing intention - should be communication from both parties (Bathurst). when contract is informal may have more impact (Wood v Capita)

Question 4

Step 3 of modern approach from Bathurst

Answer 4

Commercial sense. There is a wider presumption of symmetry, but not always (Firm PI).

Question 5

Vector Gas

Answer 5

Dispute over whether a price was inclusive or exclusive of transmission costs. Context and commercial sense would suggest that the price was exclusive of transmission costs. Context: price in earlier contract was exclusive of transmission costs. Commercial sense: including transmission costs was a bag bargain for the purchaser.

Question 6

Arnold v Britton

Answer 6

The clearer the terms of the contract the more difficult it is for the courts to depart from it

Question 7

Rainy Sky

Answer 7

If two interpretations possible, court will prefer the one consistent with business common sense

Question 8

Firm PI 1

Answer 8

If the language had an ordinary meaning it will be powerful but not conclusive

Question 9

AirNZ

Answer 9

When AirNZ entered a new agreement only some of the terms were more favourable so the question was does ‘any agreement’ mean entire agt or just particular more favourable benefits.

SC said sometimes context and commercial sense can be more important than plain meaning. No particular order to consider.

Question 10

Wood v Capita

Answer 10

Once language and textual context is considered, order of assessment is irrelevant as long as all indications from both factual background and implications of rival constructions are considered and balanced

Question 11

Bathurst

Answer 11

contract for sale of coal permits. Issue was does B have to pay $40m which was required for the coal before the price dropped

Held no: the amendment clause deferred the payment (plain meaning) L and M always risked receiving no payment, the amendment clause simply extended the risk (commercial sense).

Allowed prior negotiations

Evidence of subjective evidence/intentions will not be admissible if it was not communicated to the other party

Common understandings are more likely to be admissible

Is admissible, consider how relevant the evidence is to establishing intention vs how much time/hassle it would add to the process