Unless your contract is exceptionally clear, courts are often required to interpret what a contract meant. The general principles are fairly simple (what does it mean?).
What the courts do not want the parties to do is:
- latch onto infelicities or oddities (errors, consistencies and strange terms) to disrupt a long-term relationship or project and maximise their own gain
- invoke the role of commercial common sense to undervalue the words actually used
- reject the natural meaning of a provision simply because – with hindsight – it was imprudent
- ask the courts to re-write the contract to assist an unwise party or penalise an astute party
- suggest that because the contract is a relational contract this creates a special rule of interpretation
- use the elusive concept of good faith to sidestep the general principles.
The courts may also draw on other principles (or canons of construction):
- no part of the contract should be treated as redundant or inoperative
- any specific or bespoke terms will outweigh general provisions where there is a clash or inconsistency.
Wherever possible, the court will give the contract’s words in their natural meaning, in their entirety. It is not possible to pick and choose elements of the contract that suit your argument while ignoring the rest.
In Quantum an express duty of good faith did not require a special way of interpreting the contract.
In A&V Building v J&B Hopkins the court reviewed the whole payment mechanism (mired in conditions precedent) to validate an application. The application was made within a window permitted by the terms of the contract, but not on a specific date set out in a payment schedule. The Court of Appeal said that construing everything together is a relative easy task… although one which the judge had not managed!
What should you do?
Take control of the language used in your contracts, and read them carefully to check that they cannot be misunderstood.
Cases: Quantum Advisory Ltd v Quantum Actuarial LLP [2023] EWCA Civ 12; A & V Building Solutions Ltd v J & B Hopkins Ltd [2023] EWCA Civ 54
