Interpretation

Interpretation of contracts is a massively important topic. Most contractual disputes, I think, concern issues of interpretation and trying to determine exactly what the parties have agreed. And it's of increased prominence recently, because I think before it used to be thought that interpretation was quite easy, that you could just read the contract and of course you'd know what it meant. You could just use a dictionary and determine the meaning. But as contracts have become longer and more intricate, and very obviously the drafting of contracts is not always perfect,even sadly when you're paying very expensive lawyers lots of money to draft agreements for you, the rules and principles on the depending interpretation have received a lot more attention. And I think when you're reading this chapter, it might be useful to think of the different approach that could be taken, as existing on something of a spectrum. And that the pendulum seems to swing from one end to the other and then back again. So, originally, and traditionally you might've had quite a literal approach to the words you used, and if there was a mistake, then you would depend upon the doctrine of rectification, which we'll look at in chapter fourteen. And then there was a shift through to Lord Hoffman's approach in ICS and Chartbrook, which was quite a liberal approach to interpretation. But of course, the words that document were important, but the context and factual matrix within which the contract was completed was just as, if not sometimes more than, important. And Lord Hoffman said there's no limits to the amount of red ink that could be spilled in correcting mistakes through the interpretive exercise. So, cases which would previously have been rectification cases, perhaps being interpretation cases. I think now the pendulum is swinging back. It's not gone to a literal approach, I don't think literal approach is really advocated by anyone anymore, but more towards saying that, although you do need to place language in its context, because language can't be understood without context, what takes primacy? A very strong degree of primacy is the language deliberately chosen by the parties, which should be respected very strongly by the courts, especially in a commercial context. So, it's true that not all contracts are the same, not all contracts are commercial contracts, but the cases that were really focused on tend to be commercial contracts in this context, because it's in the commercial context that the parties have the means to litigate, and particularly to litigate all the way up to appellate courts. Now, seeing this as on something of a spectrum, I think is quite helpful, but it's true that in Wood v Capita, the Supreme court said that the story of interpretation, at least relatively recently, it's one of continuity rather than change. And I suppose one question you want to ask yourself is whether you think that that's right. But I do think that the tone that the Supreme court sets is the importance. There clearly, each contract needs to be determined in its own factual matrix. Assuming it's not a standard form of contract. But the approach the Supreme court takes tells lower courts what approach they should take as well. And if the guidance of the Supreme court can be clear, and I'm hopeful that Arnold v Brittonis now much clearer than ICS, perhaps that could put a stop to the endless flow of appeals that seem to find their way all the way up to the house of Lords and now Supreme court, on a depressingly regular basis. But it's an interesting area. Different views are taken and I particularly encourage you to read, the reading by Lord Sumption and Lord Hoffman, who were two retired. Lord Hoffman was the law Lord, Lord Sumption a Supreme court justice, but two retired judges of our top court who have very different views on this issue. And I'm sure your views will differ amongst yourselves and will probably differ with mine as well.