WK 7 - Interpretation and Rectification of Contract

Question 1

Which test is used to determine terms of a contract?

Answer 1

Objective:-

“Interpretation is the ascertainment of the
meaning which the document would convey to a
reasonable person…” per Lord Hoffman ICS Ltd v
West Bromwich Building Society [1998]

Question 2

What is meant by courts ‘not being a repairs facility’

Answer 2

Value construction of contract over reconstruction

Rectification

Question 3

What are the two approaches to interpretation of a contract?

Answer 3

(1) Literal approach
(2) Factual matrix/unitary

Question 4

Explain the literal approach

Answer 4

• What is said in the contract?
• Ordinary meaning and party knowledge of surrounding circumstances

Note: Contextualism

Question 5

What is surrounding context

Answer 5

The facts known to the parties at time of contracting

Question 6

Factual matrix/unitary approach

Answer 6

• Natural meaning: Purpose of contract
• Surrounding context
• Commercial common sense

Question 7

Describe commercial common sense

Answer 7

Prior communications

Question 8

Three requirements of factual matrix

Answer 8

• Whole commercial context
• Commercially sensible (role of judge in a commercial dispute)
• Prior communications

Question 9

Explain the iterative approach

Answer 9

• “…where there are rival meanings, the court can give weight to the implications of rival constructions by reaching a view as to which construction is more consistent with business common sense… This unitary exercise involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its commercial consequences investigated.”
  per Lord Hodge

Note: Wood; Arnold; Rainy Sky

Question 10

Explain contra proferentem

Answer 10

• Usually applied in contracts with standard terms
• When interpreting ambiguous clause, courts interpret against proferens (party seeking to rely on clause)

[i.e. in least favourable in interest way to the party who imposed it]