EXPRESS TERMS (Construing) Flashcards
What effect does the parole evidence rule have on construing terms?
If the rule applies extrinsic evidence CANNOT be used to explain the meaning of the terms of a contract
If parole evidence rule does not apply there are two approaches to taking into account the surrounding circumstances. What are they?
® Narrow approach: Evidence as to the surrounding circumstances can only be taken into account to resolve ambiguity
® Broad approach: Words convey meaning based on their context so the surrounding circumstances should be taken into account
Which approach to construing terms is used in Australia?
Narrow approach: Evidence as to the surrounding circumstances can only be taken into account to resolve ambiguity (Codelfa) (Royal Botanic Gardens)
when is there said to be ambiguity?
language is capable of more than one meaning
What test is used to construe terms?
Objective test: In construing the terms of a contract the court gives effect to the parties’ ‘presumed intentions’ (as opposed to the real / actual intentions of the parties)
If the words are clear in their ordinary and natural meaning the court will..
If the words used are clear in their ordinary and natural meaning, the Court will give effect to that meaning even though it may produce an unreasonable or unfair result (ABC v APRA)
If words give rise to more than one possible interpretation courts will..
If words give rise to more than one possible interpretation, courts will favour the interpretation which produces a reasonable commercial result (ABC v APRA; Quirke v ACL)
What is an exclusion clause?
• Exclusion clauses aim to reduce or exclude a party’s liability for conduct that would otherwise be in breach of contract or constitute a tort, such as negligence
Dealing with exclusion clauses- 4 step process
- Has the exclusion clause been validly incorporated into the contract (incorporation of express terms)
- Is the person seeking to rely on the exclusion clause privy to the contract (privity)
- Is there any legislation that affects the operation of the particular exclusion clause (consumer contracts)
- As a matter of construction, does the exclusion clause operate to exclude or limit liability in relation to the issue in dispute
Interpretation of exclusion clauses
General rule:
Exclusion clauses should be analyzed according to ordinary principles of construction (if ordinary interpretation excludes liability, then liability is excluded)
Interpretation of exclusion clauses in the case of ambiguity
In the case of ambiguity, the clause can be construed contra proferentem (strictly against the party seeking to rely on it)
Interpret the clause against the person who is seeking to reduce liability
Specific situations where exclusion clauses may not be effective
Four corners rule- Acts of the party claiming protection under the exclusion clause were not authorised or outside the 4 corners of the contract- what has happened goes beyond what was contracted for
Deviation- Where departure from the contract is of such a nature as to prevent it from relying on the exempting provisions- contracts of carriage that deviate from the intended route
Negligence- Where the acts or omissions of the party claiming protection under the exclusion clause constitutes negligence and exclusion clause does not use clear words to exclude liability for negligence- party is attempting to avoid liability from negligent conduct, or has deliberately breached the contract
Deliberate breach- very clear words are required to avoid liability for a deliberate breach
Western Export Services v Jireh International
Confirmed Codelfa: extrinsic evidence can only be considered when resolving an ambiguity
What approach to construction is used in England?
Broad approach (Investors Compensation Scheme Ltd v West Bromwich Building Society)
Royal Botanic Garden & Domain Trust v South City Council - issue
Issue- Whether only the matters stipulated in clause 4 were the only factors the Trustees could take into account when considering the rent, or whether they could consider any factor
Royal Botanic Garden & Domain Trust v South City Council - judgement
Evidence of surrounding circumstances is admissible to assist in the interpretation of a written contract if the language is susceptible of more than one meaning
Ambiguity as to the meaning of the term in this contract
Resolution involves application of the settled principles of construction
Consider the circumstances in which the words were used to work out the objective the parties had in mind
Appreciate commercial purpose of the contract, the background, the context, the market in which the parties are operating
Found that these were the only matters that could be considered
Pacific Carriers Ltd v BNP Paribas [2004] - issue
Issue- whether the letter of indemnity was valid seeing as Ms. Dhiri was not authorised to give the indemnity.
Pacific Carriers Ltd v BNP Paribas [2004] - judgement
Ambiguity, whether or not the indemnity and been signed on behalf of the bank
An objective approach used- irrelevant what Ms. Dhiri intended in signing the document
Surrounding circumstances, purpose and object of the transaction could be considered
In this case, understood the document to be a bank endorsed indemnity
ABC v APRA
- “In my opinion, both the language which the parties used and the structure of agreement which they expressed are plain and, to my mind, unambiguous.”
- “Thus this is not a case of resolving ambiguity for, in my opinion, there is none. To accept [APRA’s] submission would require a radical change to be made in the language chosen by the parties to express their intention”
Qurike v FCL Interstate Transport Services Pty Ltd - issue
Issue- Did the guarantee apply in respect of the transport services, even though it only referred to “goods”, given the purpose of the contract and the unreasonable result that would otherwise arise
Qurike v FCL Interstate Transport Services Pty Ltd - judgement
Meaning of contact to be determined objectively
Evidence of surrounding circumstances is admissible in order to interpret the contract if the language is ambiguous or capable of multiple meanings.
If language has plain meaning, extrinsic materials are not admissible
Guarantee does not apply to services
Darlington Futures Ltd v Delco Australia Pty Ltd
Issue
- could the broker rely on the exclusion clauses in the contract with their client
Darlingtion Futures Ltd v Delco Australia Pty Ltd - judgement
Exclusion Clauses were given their natural and ordinary meaning- even though it led to an unjust result
Clause 6- did not protect broker (client did not give authority)
Clause 7- did protect broker
Thomas National Transport (Melbourne) v May Baker
Issue
- Could TNT and Pay rely on the exclusion clause
