Commercial Law: Contractual Interpretation

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What are some issues with interpretation?
1. Has resulted in a vast amount of cases in senior and appellate courts 2. Parties include clauses that do not make sense 3. Parties disagree to the meaning of the clause 4. Contract interpretation disputes takes up more judicial time than any law
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What is accuracy within this context?
Getting to understand what the parties ACTUALLY intended
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What is certainty within this context?
The idea that the courts should stick to the clear meaning of the words, even if these do not strictly produce a result that the parties actually intended
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What are the two different approaches to interpretation?
Certainty: considering the written words in their ordinary meaning. Accuracy: considering the words according to their factual / broader context and background
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What are some advantages of the certainty approach? (literal approach)
Restricts the extent that the court can interfere, court take is simple; look at meaning of words and apply them, beneficial for third parties, makes the litigation process straightforward; only real evidence required, promotes commercial certainty
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What is a disadvantage of the certainty approach? (literal approach)
The risk that it ignores the parties true bargain
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What are the advantages of the accuracy approach? (purposive approach)
Considers words according to their factual context/background, looks at surrounding circumstances including commercial common sense, concerns the parties intentions rather than the language of the document
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What approach is better/favoured?
The contextual approach has developed significantly over recent years, however the Supreme Court's decision in a case has shown the brakes being applied to a stricter natural reading approach
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What is the most important case within this topic
Arnold v Britton 2015
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What is a case example of the literal approach?
Lovell and Christmas v Wall 1911
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What was said in Lovell and Christmas v Wall 1911?
It is the courts role to interpret a written document, it is improper and irrelevant to ask the parties prior to the making of the contract, what they intended or understood. Essentially, the language used is the only focus
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What is a case example for the purposive approach?
Prenn v Simmonds 1971
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What was said by a judge in Prenn v Simmonds 1971?
Lord Wilberforce: for the agreement to be understood the context is important, matrix of facts
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What is another case example of the purposive approach?
Reardon Smith Line Ltd v Hansen Tangen 1976
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What was said by a judge in Reardon Smith Line Ltd v Hansen Tangen 1976?
Lord Wilberforce: all contracts always have a setting in which they are placed, certainty right that the court should know the commercial purpose, background, context and market
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What case shows that a court can ignore clear words and interpret?
Antaios 1985
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What was said in Antaios 1985?
If detailed semantic and syntactical analysis of words can lead to a conclusion that disregards common sense, it must be made to produce common sense
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What is an important case regarding the movement towards a contextual approach?
Mannai v Eagle Star 1997
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What was stated in this case? (bullet pointed)
That the objective test is preferred, contextual knowledge is necessary, the background enables us to know what was intended
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What case did a Lord develop the contextual approach?
Inestors Compensation v West Bromwich 1998
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What was the Lord's name who commented in this case?
Lord Hoffmann
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What are Lord Hoffmann's five principles?
1) The meaning of a contractual document should be ascertained to the reasonable person having all of the background knowledge at the time of contracting. 2) Background includes anything which would have affected the way in which the language of the
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Continued
Document would have been understood by a reasonable man
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What case led to Lord Hoffmann creating his 5 principles?
ICS (Investors Compensation Scheme)
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What can be inferred by Lord Hoffmann's commentary?
He is preferring the objective approach, shows a broad principle 'absolutely anything', appears to have been influenced by the reference to matrix of fact in Prenn v Simmonds
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What is the matrix of facts?
Allows parties intentions to be determined by the context of the disputed team, when a word may be literally applied and understood in the wa
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What are some cases in favour of the contextual approach?
Prenn v Simmonds 1971, Reardon Smith v Hansen-Tangen 1976, Antaios 1985, Proctor & Gamble 2012, Mannai v Eagle
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What judges are for the literal approach?
Lord Neurberger, Lord Sumption, Justin Arnold, Andrew Burrows
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What judges have spoken in favour of the contextual approach?
Lord Hoffmann, Lord Carnwarth
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What did Lord Carnwarth say in response to Arnold v Britton?
He disagreed with the majority in Arnold v Britton, stating that the decision was 'wretchedly conceived', 'potentially catastrophic', and it could have 'grotesque consequences' he said it was the courts responsibility to regard against unfair verdict
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What judge wrote seven factors in response to Arnold v Britton?
Lord Neurberger
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Why is the case Wood v Capita 2017 important?
It reinforces contextual importance, courts should not be too quick to dismiss contextual factors if they are going to assist
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What was stated in Rainy Sky v Kookmin Bank 2011?
The court is entitled to prefer the construction out of two which is more consistent with business common sense and reflect the other
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What did Lord Sumption say in response to Arnold v Britton?
Judges are not necessarily well-placed to determine what commercial common sense requires, fairness has nothing to do with commercial contracts
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What did Justin Arnold say in response to Arnold v Britton?
If the courts interpret contracts in order to address commercial absurdity then it becomes problematic because absurdity tends to lie in the eye of the beholder ,
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What is Lord Neuberger's view?
Judges are not the best people to determine what is commercially sensible, the function of the judge is to stick with what the parties agreed and make it work
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What quotes did I find from my own research in Rainy Skye v Kookmin Bank 2011?
'Pattern LJ emphasised that the court should give effect to the plain meaning of a contract unless it 'produces a result so extreme as to suggest that it was unintended'
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Continued?
'In such circumstances, where two competing interpretations of the clause are possible, the interpretation which best gives effect to commercial purpose of the contract should be preferred'
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Other cards in this set

Card 2

Front

What is accuracy within this context?

Back

Getting to understand what the parties ACTUALLY intended

Card 3

Front

What is certainty within this context?

Back

Preview of the front of card 3

Card 4

Front

What are the two different approaches to interpretation?

Back

Preview of the front of card 4

Card 5

Front

What are some advantages of the certainty approach? (literal approach)

Back

Preview of the front of card 5
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