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Construction And Interpretation Notes

GDL Law Notes > GDL Contract Law Notes

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Lord Napier and Ettrick v Kershaw [1999] - Lord Steyn set out several key principles:
o Loyalty to the text of a commercial contract, instrument, or document read in its commercial setting is the paramount principle of interpretation.
o Words ought therefore to be interpreted in the way in which a reasonable commercial person would interpret them.
 This is more likely to give effect to the intention of the parties.
o McKendrick questions if this is fair given many commercial people consult lawyers.
Four Corners Rule:
o Lovell & Christmas v Wall (1911) - plaintiff sought an injunction to prevent the defendant, its former director, from carrying on business in Liverpool as a manufacturer of margarine. Turned on interpretation of 'provision merchant.'
 Held it is irrelevant and improper to ask what the parties, prior to the execution of the instrument,
intended or understood.
 Lord Cozens-Hardy MR explained that "construe the document according to the ordinary grammatical meaning of the words used therein".
 Everything that could properly be taken from a document would appear from its words alone, provided only that they were properly interpreted
The Rule has Gradually been Erroded

Prenn v Simmonds [1971] - Lord Wilberforce disclaimed the idea that agreements could be wholly isolated from the
"matrix of fact" in which they were set. "No contracts are made in a vacuum"
 This can still be objective: the intention which reasonable people would have if placed in the situation of the parties.
o Investors' Compensation Scheme v West Bromwich
Building Society [1998] - Lord Hoffman summarised principles
 1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties
 2) Matrix of fact includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
 3) Excluding previous negotiations and declarations of subjective intent
 4) Meaning of a document may be different from the meaning of words.

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