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Flashcards in Commercial Interpretation Deck (19)
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1

The Didymi

Hire price of vessel was to be increased by a "mutually-agreed" amount under contract for outperforming agreed speed. Parties could not agree on sum.

CA held that if the parties could not agree themselves, then the court could do this for them - courts construe contracts objectively and try to give effect to them insofar as is possible.

2

Fitzhugh v Fitzhugh

Licencsor = A and H.
Licensee = A and K.

Issue - if only A terminated the licence, was it valid without H? CA held that it was not a valid termination - licensor meant A and H as stipulated in the contract. Reason = such a short document that licensor could only have intended to have one meaning - so clause 1 also applied to clause 4 in the same way. Interpreting clause 4 in this way may have been cumbersome, but was not unworkable.

3

Principle 1

Purpose of contractual interpretation is to establish the objective intentions of the parties under the contract - what would the reasonable person understand as their common intention?

4

Principle 2

Where the contract is in writing, the written contract is the primary source of the objective intentions of the parties.

5

Principle 3

Contracts are read as a whole.

6

Thorney Park Golf v Myers Catering

Clause 4 - 3 years contract for parties to develop viable business plan.

Clause 6 - club could terminate for any reason by giving 4 months' notice in writing.

CA held that clause 6 had to be interpreted in light of clause 4. The idea that 4 months' notice could immediately be given (when the parties had expressly agreed for 3 years in the contract to develop viable business plans) did not make sense.

7

ICS v West Bromwich BS

Lord Hoffmann set out the 5 key principles of contractual interpretation:

1) Contracts are read in the context of their background facts = facts reasonably available to parties which are relevant to establishing how a reasonable person would understand what the parties intended when the contract was entered into.

2) This includes anything which would have affected the way the reasonable man understood the language in the document.

3) Admissible background does not include declarations of subjective intent and previous negotiations of the parties.

4) The meaning which a document would convey to a reasonable man is not the same thing as the meaning of its same words - contracts construed contextually.

5) Starting assumption is words have their ordinary meaning. However, if on the background the court thinks that something different must have been intended by the words, then the law does not require the court to attribute to the parties an intention which they clearly did not have.

8

Schuler v Wickman Machine Tools

Subsequent conduct of the parties is also excluded from the evidence.

9

Principle 5

Words are nearly always given their ordinary meaning in their context.

10

The Aragon

Charterer was only allowed to use the vessel within the USA East of the Panama Canal. However, US gulf on atlas was west of Panama Canal. Therefore, charterparty claimed that the charter could not use the ship in New Orleans.

Court held that they could use the ship west of the canal, but not to go through the canal to go to California etc. Words NOT given their ordinary meaning here - construed in their context.

11

Principle 6

If words are ambiguous in their context, they are given the meaning the parties most likely intended objectively.

12

YES v Soup Restaurants (SINGAPORE CASE)

S leased space in adjacent unit to Y - agreement to continue as long as the lease was not terminated. S's lease expired and was replaced by a new one. S then purported to terminate the sub-lease since their original lease had expired.

Court held that the sub-lease continued as long as S had a lease over the main unit from time to time - not just for the original lease. The fact that Y had bought an expensive kitchen unit shows that the sub-lease was not only intended to last for the duration of the original lease.

13

Napier Park v Harbourmaster

Issue - whether money was to be re-invested or paid to noteholders. Contract provided that the money could only be invested if the notes were not downgraded.

The notes were downgraded, but then were subsequently upgraded. CA said that the language of criterion 4 was capable of referring to something continuing, so the fact the notes were downgraded before did not mean they could not be re-invested. To construe the historic downgrade as meaning that the clause applied would give that historic downgrade a level of pre-eminence which was not intended - would have conflicted with the basic scheme of the CLO.

14

Principle 7

Occasionally, it is clear that the parties cannot have objectively intended the words used to have their ordinary meaning. If so, they are given the meaning the parties must objectively have intended.

The more unreasonable the result, the less likely it is that the parties intended it.

15

Charter Re v Fagan

Lord Mustill said that the more unreasonable the result is, the less likely it is that the parties intended that.

However, he said that there are limits to this principle. The role of the court is to give effect what the parties objectively intended. Even if what the parties objectively intended seems unreasonable, the court cannot substitute the interpretation for a better agreement. Parties must be held to their bargain.

16

Rice v Great Yarmouth BC

Contract for R to provide leisure management for 4 years. Clause in agreement saying that council could terminate contract with immediate effect if R breached contract. R committed very minor breach of contract. Issue = could this give rise to termination?

CA held that it would be absurd if any minor breach of contract could lead to the right of termination by council. So unreasonable result that the parties cannot objectively have intended it - so court can imply a term into the contract in these cases.

17

BCCI v Ali

Employees of bank had previously signed agreement waiving any future claims. However, stigma damage claims subsequently became available at common law.

HL held that the release of rights to remedy must be interpreted strictly - parties cannot have intended to release a claim they were unaware existed.

18

Chartbrook v Persimonn Homes

Where language construed with its ordinary meaning would lead to completely unreasonable commercial outcomes, the court is entitled to find that there was an error in the use of the language and this was not what the parties intended. Court instead considers what the reasonable person would have intended and essentially rearrange the words to give effect to this objective intention.

19

M&S v BNP Paribas

Issue was whether tenant was entitled to repayment for months rent was not used but had to be paid for due to structure of the contract. SC held that there was no implied term in the contract that the rent paid after the lease terminated had to be repaid. Court was reluctant to imply a term when such a thorough contract could easily have included the term. Secondly, it went against industry standards/common practice for rent to be repaid after lease terminated without an express provision.

Lord Neuberger set out a two-stage test for implied terms:
1) Is the implied term necessary for the contract to make commercial sense?
2) Is it clear that the parties intended the term?