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Contract Law - Terms 2 Interpretation (3/4) - Coggle Diagram
Contract Law - Terms 2 Interpretation (3/4)
I. Introduction
Meaning ascertained
Court task is give effect to the objective intention
II. Shift from Literal to Contextual Approach
1. Traditional Literal Approach
grammatical meaning of the words
(a) Advantages
Speeder/cheeper (no need for evidence of circum)
Clarity/predictability
Limited judicial role
(b) Problem
Need the context, meaning from context
2. Lord Wilberforce’s judgment in Prenn v Simmonds
Need for context, only linguistic considerations in the past :red_flag:
III. Modern Approach
1. Lord Hoffmann’s restatement of the contextual approach in ICS
Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] :red_flag:
2. Analysis of ICS principles
Aim = assimilate the way written contracts are interpreted to the common sense way that serious utterances are interpreted in ordinary life.
Gen approach -> contextual/purposive (ccial sense)
(a) Principle 1: Objectivity
Words would mean to a reasonable person in the position of the parties (// background knowledge)
(b) Principle 2: ‘Factual matrix’
//background -> absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man (see 3.)
Criticism C Staughton (1999) :closed_book: -> may have # ideas of matrix/includes, "absolute anything" = too far in the evidence?
Today: No clear limit of the scope, but not much pb in practice
Static Control Components (Europe) Ltd v Egan [2004] :warning:
(c) Principle 3: Exclusionary rule
The ‘factual matrix’ excludes ‘the previous negotiations of the parties and their declarations of subjective intent.’
Rationale: Lord Bingham :closed_book:
Avoid uncertainty/predicta. Usually shifting/ed. One sided impressions (subjectivity). 3rd parties interested cannot access it
Criticism: Lord Nicholls :closed_book:
may be helpful still, previous nego are admissible eg to prove formation, court can decide how much weight put on it
Hard to balance disadvantages/advantages -> parliament work?
Not followed eg in Unidroit
Affirmation of rule in Chartbrook Ltd v Persimmon Homes Ltd [2009] :red_flag:
subsequent conduct
is also excluded as an aid to the interpretation of written contracts
(d) Principle 4: Meaning not a matter of dictionaries
but meaning of the doc (cf 1)
(e) Principle 5: Where something has gone wrong with the language
... the law does not require judges to attribute to the parties an intention which they plainly could not have had
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(i) Achieving commercial common sense
a. Position in ICS
contract interpreted according to commercial common sense
b. Example Pink Floyd Music Ltd v EMI Records Ltd [2010] :red_flag:
c. Problems
ccial purpose underpinning the term not easy to id
Idges not well placed to assess ccial good sens
May = legal advice more difficult and undermine ccial certainty
Danger of rewriting contract ( :closed_book: N Andrews 2017)
d. Limits (recent cases)
Rainy Sky SA v Kookmin Bank [2011] :red_flag:
Arnold v Britton [2015] :red_flag:
(ii) Corrective interpretation
(4)/(5) the courts can accept that the parties have used the wrong words in the contact and so adjust or correct the words to give effect to the parties’ intention.
Potential pb: re-writing / :red_cross: distinction interpret/rectif
Limits:
Chartbrook Ltd v Persimmon Homes Ltd [2009] :red_flag:
R&S Pilling (t/a Phoenix Engineering) v UK Insurance Ltd [2019] :warning:: The case shows that, corrective interpretation is not dead: rare case tho where mistake clear w/ intented meaning
IV. Current Position: Continuity or Change?
1. Synopsis of relevant factors when interpreting a contract today
Arnold v Britton [2015] :red_flag:
That meaning has to be assessed in the light of
(i) the natural and ordinary meaning of the clause,
(ii) any other relevant provisions of [the document]
(iii) the overall purpose of the clause and [the document],
(iv) the facts and circumstances known or assumed by the parties at the time that the document was executed,
(v) commercial common sense, but
(vi) disregarding subjective evidence of any party’s intentions.’
2. Recent rationalisation of case law: Continuity, not change
Wood v Capita Insurance Services Ltd [2017]
Continuity, not change (not row back in Arnold from ICS)
Interpretation is a ‘unitary exercise’ involving an ‘iterative process’
Unit: rival meanings, the court can choose the one that is more consistent with business common sense.
Iterative: Each suggested interpretation checked against provisions of the contract and its ccial consequences (balance between factual background/implications of rival construction and relevant language)
No need to separate ‘purposive sheep’ from ‘literalist goats’? Textualism and contextualism = no conflict, combining tools for objective meaning
Assistance of textual and contextual tools varies depending on circumstances (eg quality of drafting/ prof advice?)
3. Is the recent case law really consistent?
-> adjustment of balance between text and context in favour of the former in recent case law. But not big, SC did not say that the decisions wen too far (Lord Sumption :closed_book: 2017)
4. What should the position be?
(a) Lord Sumption: Reassertion of the primacy of language
Wrong to say that language is meaningful only in relation to background. Properly drafted language has an autonomous meaning.
Without dico reconstructing an ideal contract which the parties might have made (but did not in fact make). This is an assault on party autonomy.
(b) Lord Hoffmann: Defence of ICS
Need both dico/grammar/context
(2) How to deal with difference between interpretation in ordinary life and in law? usually drafted by lawyers. Start interpretating with strong presumption that the document does not contain any linguistic mistakes.
Pb with Sumption: But if this compels judges to interpret the document contrary to the way that the reasonable person would have understood, the judges will be tempted to find some ‘
ambiguity’ to avoid applying the irrebutable presumption. Better to be intellectually honest.