A New Thing Under the Sun? The Interpretation of Contract and the ICS Decision
Pages | 374-390 |
Published date | 01 September 2008 |
Date | 01 September 2008 |
DOI | 10.3366/E1364980908000620 |
Author | Lord Bingham Cornhill |
The story is told of a science teacher called upon at short notice to cover for an absent colleague by taking a lesson in English literature, a subject unfamiliar to him. The class was studying
Such a convenient escape route is not, unhappily, available to lawyers instructed to advise on the meaning of disputed provisions in a commercial contract, or to judges required to rule on the meaning of such provisions. For better or worse, they must do their best to say what such provisions mean. This is by no means an easy task, as evidenced by the amount of time which commercial lawyers and courts devote to it, and by the divergence of opinion which not infrequently emerges. But there is probably agreement on the broad objective to be achieved. As Lord Goff of Chieveley put it, extra-judicially:
“Commercial contracts and the Commercial Court” [1984] LMCLQ 382 at 391.
We are there to help businessmen, not to hinder them: we are there to give effect to their transactions, not to frustrate them: we are there to oil the wheels of commerce, not to put a spanner in the works, or even grit in the oil.
A thread runs through our contract law that effect must be given to the reasonable expectations of honest men … The function of the law of contract is to provide an effective and fair framework for contractual dealings.
In J H Wigmore,
It is often suggested and widely believed that our forebears of 50 to 100 years or more ago adopted a strictly literal approach to the interpretation of contracts, but that we now adopt a much more flexible and rationalist approach. This comparison, although capturing an element of the truth, is in my opinion considerably exaggerated. One recalls that Lord Blackburn was not speaking only of statutory interpretation when in
(1877) 2 App Cas 743 at 763.
My Lords, it is of great importance that those principles should be ascertained; and I shall therefore state, as precisely as I can, what I understand from the decided cases to be the principles on which the Courts of Law act in construing instruments in writing; and a statute is an instrument in writing. In all cases the object is to see what is the intention expressed by the words used. But, from the imperfection of language, it is impossible to know what that intention is without inquiring farther, and seeing what the circumstances were with reference to which the words were used, and what was the object, appearing from those circumstances, which the person using them had in view; for the meaning of words varies according to the circumstances with respect to which they were used.
(1891) 18 R 957 at 960.
In a question of this kind, arising upon the construction of a contract, the Court are quite entitled to avail themselves of any light they may derive from such evidence as will place them in the same state of knowledge as was possessed by the parties at the time that the contract was entered into.
In
On the other side of the comparison, it is one thing to abjure pedantic literalism, as we all do; it is quite another to suggest that the terms in which the contracting parties have chose to express their bargain are not in all cases important and in most decisive. I am inclined to think, as suggested by Professor McMeel, that what Lord Hoffmann described in
[1998] 1 WLR 896 at 912.
(hereafter “G McMeel, “The principles and policies of contractual construction”, in A Burrows and E Peel (eds),
The sober truth may be, as I ventured to suggest in an unreported judgment in 1993,
It will be recalled that Lord Hoffmann introduced his discussion of principle by referring to the speeches of Lord Wilberforce in two cases in which a fundamental change in the law is said to have been made. The first was
At 1383.
At 1384.
Citing the passage from Lord Blackburn's judgment in the
At 1384-1385.
What he could not accept, and what he went on to address, was whether prior negotiations could be looked at in aid of construction of a written document. Rejecting the notion that English law was left behind in some island of literal interpretation, he cited a 1918 judgment of Cardozo JThis judgment by the Law Report editors was repeated in the case of
The second case to which Lord Hoffmann made express reference was
At 995-996.
It is less easy to define what evidence may be used in order to enable a term to be construed. To argue that practices adopted in the shipbuilding industry in Japan, for example as to sub-contracting, are relevant in the interpretation of a charterparty...
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