Terms Flashcards
Rose v Pim
1953, COA
RECTIFICATION
Rose and Pim entered into a contract for the sale of horsebeans. Pim delivers a different type of bean than Rose expected.
Contract could not be rectified/avoided because objective conduct of the parties suggested no express intention for a certain type of bean.
Rectification can only be used where there is proof that the written agreement does not correspond to the common intention of the parties.
ICS case
1997, HOL (UK)
INTERPRETATION
Lord Hoffman set out five principles for modern contract interpretation:
(1). contract interpretation is based on a reasonable person with the background knowledge available to the parties.
(2) the background knowledge is anything that gave effect to the way language was used.
(3) Prior negotiations remain inadmissible
(4) Meaning is based on the document in its entirety, not use the meaning of individual words.
(5) Plain meaning and commercial sense presumptions.
Vector Gas
2010, SC (NZ)
INTERPRETATION
Dispute on whether the stated price of gas in the contract was inclusive of transmission costs or not.
Case held that the traditional rules based approach can be prevailed.
In this case the Court looked at commercial context, previous contracts and emails to form the overall context and held that transport costs were included in the stated price.
This case has been criticised as one of the worst contract law judgements because it was too enthusiastic on the modern approach and suggested that background information and commercial common sense prevails the plain meaning.
Newbery v AA Insurance
2015, HC (NZ)
INTERPRETATION
Couples figurines were damaged in CHCH earthquakes. Their insurance policy states that cover for “works of art” (which was defined as “ornaments and “sculptures”) was limited to $20,000.
This case was a matter of statutory interpretation - held that nothing excluded figurines from being “works of art” by using background evidence.
Case illustrated that generally where parties argue for an interpretation with the benefit of hindsight it is merely subjective evidence which should be disregarded because contracts are to be interpreted on what the parties objectively intended.
Firm P 1
2014, SC (NZ)
INTERPRETATION
Supreme Court officially confirms ISC principles and Vector Gas (that not limited to ordinary meaning and can be departed by using objective test of what intention was using background knowledge of parties).
BUT reaffirms that the text remains centrally important - but the presumption that the ordinary meaning was what the parties intended can be rebutted and is not very strong.
Rainy Sky
INTERPRETATION
Where there are two meanings it is generally appropriate to adopt the meaning that is most consistent with business common sense.
Arnold v Briton
2015, (UK)
INTERPRETATION
The clearer the plain meaning of the words, the harder it is for the court to depart from the contract.
The court should not seek out ambiguity just because the contract seems unfair.
Air New Zealand Limited and New Zealand Air Line Pilots Association
2017, SC (NZ)
INTERPRETATION
Terms should be taken by what both parties intend collectively, not separately as that would be giving effect to subjective intentions with the aid of hindsight.
More than just the two interpretations of the parties can be consider = courts can consider alternative meanings than those put forward by the disputing parties.
Held that there is no strict process or particualr order for contract interpretation.
Held that where interpretation is ambigious there is a presumption that it be read to the benefit of the person recieving the contarct = contra proferentem. But if there are good reasons for it to be read to benefit the drafter than it can be. This is less applicable when both parties are commercial parties and help write the contract.
Wood v Capitia
2017, SC (UK)
INTERPRETATION
Where an agreement is informal, brief and lacks professional assistance more emphasis can be put on context.
Bathurst v L&M Coal
2021, SC (NZ)
Bathurst brought mining assets from L&M - part of the payment was subject to performance payments. There were delays for years in the sale and in that time market valued dropped significantly - got to point that business had to shut down. As a result of no mining there were no performance payments made.
Case made progress in the status of admissibility - held that prior negotiations MAY be admissible based upon this two step test: (1) if the evidence is prima facie relevant (e.g., shows more than just subjective intent) and (2) its probative value is greater than the effort needed to admit the evidence.
+ Subsequent conduct will rarely be relevant.
Court looked at prior negotiations (letters and financial documents) and commercial common sense to hold that performance payments do not need to be made.
Implication: said that BP still appropriate (but not a strict test) and that implication is a test of strict necessity (starting point is that if nothing is said then nothing happens).
BP Refinery
1977, PC (UK)
IMPLICATION
Sets out the requirements for modern approach to implied terms:
(1) reasonable and equitable
(2) must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it
(3) must be so obvious that it goes without saying
(4) must be capable of clear expressions
(5) must not contradict any express term of the contract
Bathurst says first three are looked at together.
Belize
2009, PC (UK)
IMPLICATION
Due to reaching shareholding threshold company was allocated two director positions - financial trouble then resulted in going below the shareholding threshold - what happens to the directors now as not specified in contract?
Term was implied that directors should resign - court was required to find that it was objectively intended by the parties. Common sense suggest that the parties cannot have intended that you’d be stuck with directors with no way or getting rid of them and there was a threshold requirement for a reason.
Judgement did not follow the requirements set out by BP but used them a reference points (therefore if one is not satisfied it is not determinative). Said the key test is what a reasonable person reading the contract would think it meant.
However, judgement was controversial as it conflated implication and interpretation leaving law uncertain.
Ward Equipment v Preston
2017, COA (NZ)
IMPLICATION
Provision in contract for termination of agreement upon breach but contained no general termination clause. Ward appeals HC decision to imply term that contract can be terminated with reasonable notice.
Appeal was allowed and held that no term can be implied - because the parties had consciously agreed to delete a general termination clause during pre-contractual negotiations, the term would contradict the express wording and it was not required for business efficacy.
Implication is not to be used to simply improve the contract but to give effect to a misapplied intention.
Used PB requirements - these remain relevant in NZ.
Law left uncertain (until Bathurst).
Robb v James
2014, COA (NZ)
RECTIFICATION
Robb’s discover (after ASP going unconditional) “lost land” and transfer it to son Gary who intends to build on it.
Purchasers say there was a common understanding that all land would be there’s and seek rectification of the terms of the contract to align with this common intention.
Court held in favour of purchasers.
Where rectification may cause prejudice to a bona fide purchaser for value without notice equity will step in and prevent rectification from being used. Gary was not a bona fide purchaser because he knew the land had been sold and was involved in discussions with purchasers.
Courts imposed a constructive trust because land was transferred to Gary who is not privy to the ASP.
Westland Savings Bank v Hancock
RECTIFICATION
Dispute about mortgage agreement being fixed or floating rate.
Behaviour of both parties was consistent with floating rate due to the bank increasing the interest rate and the Hancocks paying the increased rate.
Court held that there is no requirement for there to be a formal expression of common intention - can be inferred by evidence / actions. But that common intention must be objectively apparent - have to be able to point to actual evidence.
