Interpretation of contracts

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Interpretation of contracts

Please try after sometime. This guide summarises the general approach taken by the English courts to Interpretation of contracts interpretation. It considers the legal rules and key principles of interpretation, including the general approach to construing express terms and the tools of construction that the courts have at their disposal to assist them in reaching a just outcome between the parties.

Legal rules of contractual interpretation General rules of interpretation English law takes a purposive and commercial approach to the construction of contracts. This is an objective test; the court is concerned to identify the intention of the parties by reference to "what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean".

The natural and ordinary Interpretation of contracts of the clause. The overall purpose of the clause and the contract. The facts and circumstances known or assumed by the parties at the time the contract was executed.

Interpretation of contracts

The court will not take into account any subjective evidence of either party's intentions. Common terms and phrases Some words and phrases have come to acquire an accepted legal sense through decided cases.

Good examples of this are phrases such as "best endeavours" or "reasonable endeavours". The court first tries to find the ordinary meaning of words as they are popularly understood but if the context clearly requires a special or peculiar interpretation, the court will accept that special meaning.

Technical or scientific words are usually given their technical or scientific meanings unless the context indicates otherwise.

In recent years there has been a shift in emphasis in the importance of commercial common sense when interpreting contractual terms. However, the Supreme Court has now made it clear that the starting point is the natural meaning of the language used; commercial common sense cannot be relied on to undervalue the importance of the language of the provision which is to be construed.

Courts will be slow to reject the meaning of a provision simply because one of the parties made a bad bargain; it is not for the court to improve the positions of the parties by re-writing the contract. However, these principles are just pointers and the court will only resort to applying them if the meaning cannot be found using the general rules of interpretation outlined above.

The court will be reluctant to adopt a meaning that gives an unfair result in the absence of clear drafting. For example, the courts have held that unambiguous language is required to exclude certain contractual remedies. Usually the court will resolve any uncertainty or doubt surrounding a provision against the party who would benefit from the suggested interpretation.

This is the so-called "contra proferentem" rule whereby the clause is construed against the party seeking to rely on it. It applies in particular to the party seeking to take the benefit of an exclusion or limitation of liability. However, recent cases indicate that the rule has a very limited role in relation to commercial contracts negotiated between sophisticated parties of equal bargaining strength.

Where the preceding words are each part of a common genus or category, subsequent words will be interpreted "ejusdem generis", i. So, for example, the words "or other inevitable accident" in a clause making reference to "fire, flood, storm, tempest" means other accidents of a similar kind.

Can the court look beyond the written contract when construing the meaning of a contract? In practice the situations in which courts are prepared to imply a term into a contract are limited. In appropriate cases the court will recognise standard practice in particular trades or areas of industry and is willing to imply terms into an agreement to reflect this practice, provided the wording of the contract is not inconsistent with the implication.

Terms implied to reflect the parties' presumed intentions The court will only be prepared to accept other implications if it is satisfied that the implication sought reflects the presumed intention of the parties.

The court will look at the particular context of the contract and its language and the relationship between the parties to ascertain if the implication sought can be inferred. The criteria for implying a term were expressed succinctly by the Privy Council in B.

Essentially the court is trying to make the contract workable and to ascertain the parties' presumed intentions in the sense of what they would have agreed if they had thought about the point. Ultimately, however, the "rules" of construction are no more than guidance tools and the particular facts and circumstances of the case determine how they are applied.

In practice it is open to judges to select from these tools at their discretion in order to make the contract work, give effect to the parties' presumed intentions and to try to achieve reasonable justice between them.In arriving at its conclusion the court applies relatively well-established principles of interpretation found in Chapter 4 of The Civil Transactions Act (commonly referred to as the Civil Code), under the title “Construction of Contracts”.

The intention of the parties to a contract controls its interpretation. Firestone Tire & Rubber Co. v. United States, F.2d , (Ct. Cl. ). In construing the terms of a contract, however, the parties' intent must be gathered from the instrument as a whole in an attempt to glean the meaning of terms within the contract's intended context.

Interpretation. Explore the process by which courts determine the meaning of indefinite, ambiguous, or omitted terms in a contract to allow enforcement, as well as . The conclusions about the optimal method of interpretation can be summa-rized as follows.

First, some method of interpretation of contracts is always. Abstract. Interpretation determines the meaning of a legal actor’s words and actions, construction their legal effect. Although the interpretation-construction distinction has a long pedigree, contract scholars today rarely attend to it, and the relationship between the two activities remains understudied.

English law takes a purposive and commercial approach to the construction of contracts. 2 The starting point for the court is to identify the intention of the contracting parties.

Interpretation of contracts under Dutch law