07 December 2018 - Post by:Jason Rix
Last month Edwin Peel came to talk to us about developments in contract law. A chunk of the presentation was about interpretation and what he coined its “de-Hoffmannisation”.*
We now know, following Wood v Capita, that: “The court’s task is to ascertain the objective meaning of the language which the parties have chosen to express their agreement. It has long been accepted that this is not a literalist exercise focused solely on a parsing of the wording of the particular clause but that the court must consider the contract as a whole and, depending on the nature, formality and quality of drafting of the contract, give more or less weight to elements of the wider context in reaching its view as to that objective meaning.” While both literalism and contextualism have a role to play in ascertaining the meaning of a contract, the natural language is likely to win the day all other things being equal.
These were the post-Wood v Capita cases that Edwin chose to illustrate the point:
- Teva Pharma v Astrazeneca, where the Court of Appeal held that the judge at first instance had been wrong to subvert the natural meaning of the provision in question to what he saw as considerations of commercial common sense.
- NHS Commissioning Board v Silovsky, where the Court of Appeal stressed that there is a limit to how far it can go when interpreting a contract. On the facts, “Rent 77,238 Calendar monthly 15th of each month” appearing in a table under a column headed “Annual Value” meant that the sum payable was fixed at the specified amount and could not be read, even in context, as meaning that a variable rent applied.
- Grimes v The Trustees of the Essex Farmers And Union Hunt, which shows, by way of contrast, that you do not have to be a slave to literalism. This case was about whether “or” meant “either”. The tenancy agreement stated that notice had to be served “…at the address given … or such other address as has previously been notified in writing.” The notice had been sent to the address given, despite the fact that a new address had been notified. The Court of Appeal held that that judge at first instance had been overly literal in permitting service at the given address when a new one had been notified: the “language can naturally be read as providing for an alternative which is not only exclusionary but also substitutive … viewed objectively, this is what the parties must have intended.”
The message is twofold: if you are drafting a contract you wield power because the court should respect what you have written; the quid pro quo is that the court may not rescue unfortunate drafting and may accept that you made a bad bargain.
*Lord Sumption’s take on interpretation is recorded in his speech “A Question of Taste: The Supreme Court and the Interpretation of Contracts” and Lord Hoffmann’s in “Language and lawyers” L.Q.R. 2018, 134(Oct), 553-573.