Sembcorp Flashcards
How does the court define Interpretation, Implication and Construction?
Interpretation is ascertaining the meaning of the expression in the contract, and ascribing true meaning to the language expressed.
Implication steps in where interpretation does not always provide a complete picture of parties’ intentions, and there were gaps in the contract (i.e. silence), then the courts will employ this process to fill the gap in the contract to give effect to parties’ PRESUMED intentions.
Construction is to ascertain parties’ intentions arising from contract as a whole, and not confined to specific words used.
Construction = Interpretation + Implication (+ Rectification)
Hoffman’s contextual approach (Principle 1) - what is the gist of it?
That interpretation ascertains meaning which document conveys to reasonable person having all the background knowledge reasonably available to the parties at times of contract, and may depart from literal meaning of words - somewhat approved by Zurich (double confirm on this)
Therefore, extrinsic evidence may be admitted
What kind of extrinsic evidence may be admissible for interpretation?
According to Zurich, only EE that proves what parties, from the objective viewpoint, ultimately agreed upon, subject to limitations that the EE is relevant, reasonably available to all parties and relates to a clear and obvious context
What does SG think about admitting pre-contractual negotiations or subsequent conduct of parties?
No absolute or rigid prohibition against evidence of previous negotiation or subsequent conduct, although in normal cases, such evidence is likely to be inadmissible. No strict stance is taken, will wait for a case to arise. Rejects the robust approach in the New Zealand courts
What does the Evidence Act govern, and what does it not govern?
It only governs the admissibility of evidence. While that will affect interpretation and construction of contracts, it does not offer a guide on how to construct a contract
Which section is the contextual approach statutorily embedded in?
s94(f), which essentially says that EE is admissible if it is relevant, reasonably available to all parties and relates to a clear and obvious context
And that this clause seems to be of general application and permits admission of facts that shows “in what manner the language of a document is related to existing facts” BUT limited by sections 95-100
What is the tension offered by section 95 and 96?
95: EE is not admissible where the language is ambiguous
96: EE is not admissible where clear and plain language is used
What is therefore the scope where 94(f) is applicable?
EE of facts and circumstances which were (or ought to have been) in the mind of the drafter when he used those words are admissible, BUT not EE to show facts of the subjective intention of the party.
Regarding ambiguous language, only latent ambiguity is allowed, but not patent ambiguity.
What is the SOP for admitting evidence
- EE is admitted by rules of evidence, not contextual interpretation
- Refer first to Evidence Act, rather than the Common law approach
- General admissibility of evidence under 94(f) read alongside exceptions given by 95-100
- EE of surrounding circumstances generally admissible. EE of subjective intention not admissible unless brought under exceptions of 97-100.
Why is the robust approach generally not good
Policy considerations and pragmatism. Don’t want to waste time to bring in a flood of evidence to settle claims
Four requirements for contextual approach for construction?
- Parties contending that factual matrix is relevant to construction of contract must plead with specificity each fact of the factual matrix that they wish to rely on in support of their construction of contract
- Factual circumstances of facts in (1) were known to all relevant parties must also be pleaded with sufficient particularity
- Parties in the pleadings should specify effect that such facts will have on the contended construction
- Obligation of parties to disclose evidence would be limited to evidence that is relevant to the facts pleaded in (1) and (2)
Implied terms in fact - What does Foo Jong Peng say about Belize
Rejects Belize because of the conceptual uncertainty and unclear approach it introduced.
Belize may be taken to suggest that implication is subsumed in the interpretation of expressed terms.
However, implication involves tests and techniques that are very specific and different from interpretation in general, and should not be conflated together.
Belize is only acceptable if it suggests that implication is but a part of construction of the document as a whole, rather than specific express terms interpretation
Foo also rejects Hoffman’s standard of reasonableness for implications, and reaffirms necessity. Reasonableness is necessary but insufficient.
What is Step 1 of Sembcorp’s implication in fact?
Identify the true gaps with Business efficacy test.
True gaps in the contract must NOT be contemplated by parties - therefore the courts can give effect to presumed intentions via implication.
If it was contemplated by parties, but parties mistakenly thought it was reflected in the express terms, then the court cannot give effect to actual terms. Can only be corrected via rectification.
If it was contemplated but ignored because there was no agreement, then cannot, because implying would go against actual intention of parties.
Business efficacy identifies these true gaps. But limited because what does efficacy really mean, and what is the standard of efficacy to be used? Presumably minimum efficacy, but the reasoning and definition of it is uncertain.
What is Step 2 of Sembcorp’s test?
The Officious bystander test. Since business efficacy test shows the absence of efficacy, suggests that parties may have intended to agree on an unexpressed term and shows the existence of a lacuna.
However, the term to fill the gap is not defined by the business efficacy test.
Therefore, the officious bystander test helps courts define the terms that reflects the presumed intention of the parties vis-a-vis the gap.
