This is an extract of our Construction And Interpretation document, which we sell as part of our GDL Contract Law Notes collection written by the top tier of Cambridge/Bpp/College Of Law students.
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Lord Napier and Ettrick v Kershaw  - 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  - 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  - 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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