References: [1976] 1 WLR 989, [1976] 2 Lloyd’s Rep 621, [1976] 3 All ER 570
Coram: Lord Wilberforce
Ratio:In construing a contract, three principles can be found. The contextual scene is always relevant. Secondly, what is admissible as a matter of the rules of evidence under this heading is what is arguably relevant, but admissibility is not decisive. The real issue is what evidence of surrounding circumstances may ultimately be allowed to influence the question of interpretation. That depends on what meanings the language read against the objective contextual scene will let in. Thirdly, the enquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind.
Lord Wilberforce commented on the Wooler case saying: ‘I think that all of their Lordships are saying, in different words, the same thing — what the court must do must be to place itself in thought in the same factual matrix as that in which the parties were’.
Lord Wilberforce said: ‘No contracts are made in a vacuum: there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as ‘the surrounding circumstances’ but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.’
This case cites:

• Explained – Charrington & Co Ltd -v- Wooler HL ([1914] AC 71)
  The court is entitled to know the surrounding circumstances which prevailed when the contract was made. A contract is not to be construed in a vacuum. The term ‘market’ did not have a ‘fixed legal significance’ .
  Lord Dunedin said: ‘in order to . .

(This list may be incomplete)
This case is cited by:

• Cited – Wilson -v- Secretary of State for Trade and Industry; Wilson -v- First County Trust Ltd (No 2) HL (House of Lords, Gazette 18-Sep-03, Times 11-Jul-03, Bailii, [2003] UKHL 40, [2003] 3 WLR 568, [2004] 1 AC 816, [2003] 2 All ER (Comm) 491, [2003] HRLR 33, [2003] UKHRR 1085, [2003] 4 All ER 97)
  The respondent appealed against a finding that the provision which made a loan agreement completely invalid for lack of compliance with the 1974 Act was itself invalid under the Human Rights Act since it deprived the respondent of its property . .
• Cited – Mannai Investment Co Ltd -v- Eagle Star Assurance HL (Times 26-May-97, House of Lords, Bailii, [1997] 2 WLR 945, [1997] UKHL 19, [1997] AC 749, [1997] 3 All ER 352, [1997] 24 EG 122)
  Leases contained clauses allowing the tenant to break the lease by serving not less than six months notice to expire on the third anniversary of the commencement date of the term of the lease. The tenant gave notice to determine the leases on 12th . .
• Cited – Westminster City Council -v- National Asylum Support Service HL (House of Lords, Times 18-Oct-02, Bailii, [2002] UKHL 38, [2002] 1 WLR 2956, [2002] 4 All ER 654, [2002] HLR 58, (2002) 5 CCL Rep 511, [2003] BLGR 23)
  The applicant sought assistance from the local authority. He suffered from spinal myeloma, was destitute and an asylum seeker.
  Held: Although the Act had withdrawn the obligation to provide assistance for many asylum seekers, those who were . .
• Cited – Investors Compensation Scheme Ltd -v- West Bromwich Building Society HL (Times 24-Jun-97, House of Lords, Bailii, [1997] UKHL 28, [1998] 1 All ER 98, [1998] 1 WLR 896, [1998] AC 896)
  The respondent gave advice on home income plans. The individual claimants had assigned their initial claims to the scheme, but later sought also to have their mortgages in favour of the respondent set aside.
  Held: Investors having once . .
• Cited – Youell and Others -v- Bland Welch & Co Ltd and Others CA ([1992] 2 Lloyd’s Rep 127)
  The court considered whether an underwiter’s slip was admissible when construing the policy which followed.
  Held: Staughton LJ: ‘It is now, in my view, somewhat old-fashioned to approach such a problem armed with the parol evidence rule, that . .
• Cited – Bruton -v- London and Quadrant Housing Trust HL (Gazette 14-Jul-99, Times 25-Jun-99, Gazette 21-Jul-99, House of Lords, Bailii, [1999] 3 All ER 481, [2000] 1 AC 406, [1999] UKHL 26, [1999] 2 EGLR 59, [1999] 3 WLR 150, [1999] EG 90, [1999] L & TR 469, (1999) 31 HLR 902, [1999] NPC 73, [1999] 30 EG 91, (1999) 78 P & CR D21)
  The claimant sought to oblige the respondent to repair his flat under the 1988 Act. The respondent replied that the arrangement was a licence only, and not protected under the Act.
  Held: The housing association had a temporary licence to . .
• Cited – Catnic Components Ltd & Another -v- Hill & Smith Ltd HL ([1983] FSR 512, [1982] RPC 183)
  The plaintiffs had been established as market leaders with their patented construction, had ample production capacity and stocks, but had never granted any licence under their patent. The defendants had not been in business in this field at all, . .
• Cited – Kirin-Amgen Inc and others -v- Hoechst Marion Roussel Limited and others etc HL (House of Lords, [2004] UKHL 46, Bailii, [2005] RPC 169, (2005) 28(7) IPD 28049, [2005] 1 All ER 667)
  The claims arose in connection with the validity and alleged infringement of a European Patent on erythropoietin (‘EPO’).
  Held: ‘Construction is objective in the sense that it is concerned with what a reasonable person to whom the utterance . .
• Cited – McDowall -v- Inland Revenue SCIT (Bailii, [2003] UKSC SPC00382)
  Gifts had been made from an estate, purportedly under a power of attorney. During his lifetime, the deceased had made various gifts to his children. As he begand to suffer Alzheimers, he gave a power of attorney. He had substantial assets, well . .
• Cited – Barclays Bank Plc -v- Weeks Legg & Dean (a Firm); Barclays Bank Plc -v- Lougher and Others; Barclays Bank Plc -v- Hopkin John & Co CA (Gazette 28-May-98, Gazette 24-Jun-98, Times 15-Jun-98, Bailii, [1998] EWCA Civ 868, [1998] 3 All ER 213, [1999] QB 309)
  The defendant solicitors had each acted for banks in completing charges over property. They had given the standard agreed form of undertaking to secure a good and marketable title, and the banks now alleged that they were in breach because . .
• Cited – Crancour Ltd -v- Da Silvaesa and Another CA (Bailii, [1986] EWCA Civ 1, [1986] 1 EGLR 80, [1986] 52 P&CR 204, [1986] 18 HLR 265, [1986] 278 EG 618)
  The plaintiff sought possession of two rooms in a house occupied by the defendants separately. The agreements stated that they were licences. The agreements excluded the occupiers between 10:30am and noon on each day. The occupiers claimed to be . .
• Cited – Persimmon Homes (South Coast) Ltd -v- Hall Aggregates (South Coast) Ltd and Another TCC (Bailii, [2008] EWHC 2379 (TCC))
  The parties had agreed for the sale of land under an option agreement. The builder purchasers now sought to exercise rights to adjust the price downwards.
  Held: The provisions had been intended and had achieved a prompt and binding settlement . .
• Cited – Islam, Regina -v- HL (Bailii, [2009] UKHL 30, Times, [2009] 3 WLR 1)
  The defendant appealed against a confiscation order saying that it should not have been set at values which reflected the black market value of the drugs he had imported.
  Held: The appeal failed. The court could take account of the illegal . .
• Cited – Berrisford -v- Mexfield Housing Co-Operative Ltd SC ([2011] NPC 115, [2011] 46 EG 105, [2011] 3 WLR 1091, Bailii, [2011] UKSC 32, Bailii Summary, UKSC 2010/0167, SC Summary, SC)
  The tenant appealed against an order granting possession. The tenancy, being of a mutual housing co-operative did not have security but was in a form restricting the landlord’s right to recover possession, and the tenant resisted saying that it was . .
• Cited – Marley -v- Rawlings and Another SC (Bailii, [2014] UKSC 2, [2014] 2 WLR 213, [2014] WTLR 299, 16 ITELR 642, [2014] 1 All ER 807, [2014] WLR(D) 18, [2014] Fam Law 466, Bailii Summary, WLRD, UKSC 2012/0057, SC Summary, SC)
  A husband and wife had each executed the will which had been prepared for the other, owing to an oversight on the part of their solicitor; the question which arose was whether the will of the husband, who died after his wife, was valid. The parties . .
• Cited – Arnold -v- Britton and Others SC (Bailii, [2015] UKSC 36, [2015] HLR 31, [2016] 1 All ER 1, [2015] WLR(D) 247, [2015] 2 WLR 1593, [2015] AC 1619, Bailii Summary, WLRD, UKSC 2013/0193, SC, SC Summary, SC Video)
  A standard lease of plots on a caravan park, contained a probision which appeared to increase the rent by 10% in each year. The tenants argued that such a substantial increase could not have been intended.
  Held: When interpreting a written . .
• Cited – Arnold -v- Britton and Others SC (Bailii, [2015] UKSC 36, [2015] HLR 31, [2016] 1 All ER 1, [2015] WLR(D) 247, [2015] 2 WLR 1593, [2015] AC 1619, Bailii Summary, WLRD, UKSC 2013/0193, SC, SC Summary, SC Video)
  A standard lease of plots on a caravan park, contained a probision which appeared to increase the rent by 10% in each year. The tenants argued that such a substantial increase could not have been intended.
  Held: When interpreting a written . .

(This list may be incomplete)

Last Update: 02-Jul-16
Ref: 184430

References: [2014] EWHC 1194 (Mercantile)
Links: Bailii
Coram: Leggatt J

References: [1976] 1 WLR 989, [1976] 2 Lloyd’s Rep 621, [1976] 3 All ER 570
Coram: Lord Wilberforce
In construing a contract, three principles can be found. The contextual scene is always relevant. Secondly, what is admissible as a matter of the rules of evidence under this heading is what is arguably relevant, but admissibility is not decisive. The real issue is what evidence of surrounding circumstances may ultimately be allowed to influence the question of interpretation. That depends on what meanings the language read against the objective contextual scene will let in. Thirdly, the enquiry is objective: the question is what reasonable persons, circumstanced as the actual parties were, would have had in mind.
Lord Wilberforce commented on the Wooler case saying: ‘I think that all of their Lordships are saying, in different words, the same thing — what the court must do must be to place itself in thought in the same factual matrix as that in which the parties were’.
Lord Wilberforce said: ‘No contracts are made in a vacuum: there is always a setting in which they have to be placed. The nature of what is legitimate to have regard to is usually described as ‘the surrounding circumstances’ but this phrase is imprecise: it can be illustrated but hardly defined. In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.’
This case cites:

• Explained – Charrington & Co Ltd -v- Wooler HL ([1914] AC 71)
  The court is entitled to know the surrounding circumstances which prevailed when the contract was made. A contract is not to be construed in a vacuum. The term ‘market’ did not have a ‘fixed legal significance’ .
  Lord Dunedin said: ‘in order to . .

This case is cited by:

• Cited – Wilson -v- Secretary of State for Trade and Industry; Wilson -v- First County Trust Ltd (No 2) HL (House of Lords, Gazette 18-Sep-03, Times 11-Jul-03, Bailii, [2003] UKHL 40, [2003] 3 WLR 568, [2004] 1 AC 816, [2003] 2 All ER (Comm) 491, [2003] HRLR 33, [2003] UKHRR 1085, [2003] 4 All ER 97)
  The respondent appealed against a finding that the provision which made a loan agreement completely invalid for lack of compliance with the 1974 Act was itself invalid under the Human Rights Act since it deprived the respondent of its property . .
• Cited – Mannai Investment Co Ltd -v- Eagle Star Assurance HL (Times 26-May-97, House of Lords, Bailii, [1997] 2 WLR 945, [1997] UKHL 19, [1997] AC 749, [1997] 3 All ER 352, [1997] 24 EG 122)
  Leases contained clauses allowing the tenant to break the lease by serving not less than six months notice to expire on the third anniversary of the commencement date of the term of the lease. The tenant gave notice to determine the leases on 12th . .
• Cited – Westminster City Council -v- National Asylum Support Service HL (House of Lords, Times 18-Oct-02, Bailii, [2002] UKHL 38, [2002] 1 WLR 2956, [2002] 4 All ER 654, [2002] HLR 58, (2002) 5 CCL Rep 511, [2003] BLGR 23)
  The applicant sought assistance from the local authority. He suffered from spinal myeloma, was destitute and an asylum seeker.
  Held: Although the Act had withdrawn the obligation to provide assistance for many asylum seekers, those who were . .
• Cited – Investors Compensation Scheme Ltd -v- West Bromwich Building Society HL (Times 24-Jun-97, House of Lords, Bailii, [1997] UKHL 28, [1998] 1 All ER 98, [1998] 1 WLR 896, [1998] AC 896)
  The respondent gave advice on home income plans. The individual claimants had assigned their initial claims to the scheme, but later sought also to have their mortgages in favour of the respondent set aside.
  Held: Investors having once . .
• Cited – Youell and Others -v- Bland Welch & Co Ltd and Others CA ([1992] 2 Lloyd’s Rep 127)
  The court considered whether an underwiter’s slip was admissible when construing the policy which followed.
  Held: Staughton LJ: ‘It is now, in my view, somewhat old-fashioned to approach such a problem armed with the parol evidence rule, that . .
• Cited – Bruton -v- London and Quadrant Housing Trust HL (Gazette 14-Jul-99, Times 25-Jun-99, Gazette 21-Jul-99, House of Lords, Bailii, [1999] 3 All ER 481, [2000] 1 AC 406, [1999] UKHL 26, [1999] 2 EGLR 59, [1999] 3 WLR 150, [1999] EG 90, [1999] L & TR 469, (1999) 31 HLR 902, [1999] NPC 73, [1999] 30 EG 91, (1999) 78 P & CR D21)
  The claimant sought to oblige the respondent to repair his flat under the 1988 Act. The respondent replied that the arrangement was a licence only, and not protected under the Act.
  Held: The housing association had a temporary licence to . .
• Cited – Catnic Components Ltd & Another -v- Hill & Smith Ltd HL ([1983] FSR 512, [1982] RPC 183)
  The plaintiffs had been established as market leaders with their patented construction, had ample production capacity and stocks, but had never granted any licence under their patent. The defendants had not been in business in this field at all, . .
• Cited – Kirin-Amgen Inc and others -v- Hoechst Marion Roussel Limited and others etc HL (House of Lords, [2004] UKHL 46, Bailii, [2005] RPC 169, (2005) 28(7) IPD 28049, [2005] 1 All ER 667)
  The claims arose in connection with the validity and alleged infringement of a European Patent on erythropoietin (‘EPO’).
  Held: ‘Construction is objective in the sense that it is concerned with what a reasonable person to whom the utterance . .
• Cited – McDowall -v- Inland Revenue SCIT (Bailii, [2003] UKSC SPC00382)
  Gifts had been made from an estate, purportedly under a power of attorney. During his lifetime, the deceased had made various gifts to his children. As he begand to suffer Alzheimers, he gave a power of attorney. He had substantial assets, well . .
• Cited – Barclays Bank Plc -v- Weeks Legg & Dean (a Firm); Barclays Bank Plc -v- Lougher and Others; Barclays Bank Plc -v- Hopkin John & Co CA (Gazette 28-May-98, Gazette 24-Jun-98, Times 15-Jun-98, Bailii, [1998] EWCA Civ 868, [1998] 3 All ER 213, [1999] QB 309)
  The defendant solicitors had each acted for banks in completing charges over property. They had given the standard agreed form of undertaking to secure a good and marketable title, and the banks now alleged that they were in breach because . .
• Cited – Crancour Ltd -v- Da Silvaesa and Another CA (Bailii, [1986] EWCA Civ 1, [1986] 1 EGLR 80, [1986] 52 P&CR 204, [1986] 18 HLR 265, [1986] 278 EG 618)
  The plaintiff sought possession of two rooms in a house occupied by the defendants separately. The agreements stated that they were licences. The agreements excluded the occupiers between 10:30am and noon on each day. The occupiers claimed to be . .
• Cited – Persimmon Homes (South Coast) Ltd -v- Hall Aggregates (South Coast) Ltd and Another TCC (Bailii, [2008] EWHC 2379 (TCC))
  The parties had agreed for the sale of land under an option agreement. The builder purchasers now sought to exercise rights to adjust the price downwards.
  Held: The provisions had been intended and had achieved a prompt and binding settlement . .
• Cited – Islam, Regina -v- HL (Bailii, [2009] UKHL 30, Times, [2009] 3 WLR 1)
  The defendant appealed against a confiscation order saying that it should not have been set at values which reflected the black market value of the drugs he had imported.
  Held: The appeal failed. The court could take account of the illegal . .
• Cited – Berrisford -v- Mexfield Housing Co-Operative Ltd SC ([2011] NPC 115, [2011] 46 EG 105, [2011] 3 WLR 1091, Bailii, [2011] UKSC 32, Bailii Summary, UKSC 2010/0167, SC Summary, SC)
  The tenant appealed against an order granting possession. The tenancy, being of a mutual housing co-operative did not have security but was in a form restricting the landlord’s right to recover possession, and the tenant resisted saying that it was . .
• Cited – Marley -v- Rawlings and Another SC (Bailii, [2014] UKSC 2, [2014] 2 WLR 213, [2014] WTLR 299, 16 ITELR 642, [2014] 1 All ER 807, [2014] WLR(D) 18, [2014] Fam Law 466, Bailii Summary, WLRD, UKSC 2012/0057, SC Summary, SC)
  A husband and wife had each executed the will which had been prepared for the other, owing to an oversight on the part of their solicitor; the question which arose was whether the will of the husband, who died after his wife, was valid. The parties . .