The parties entered an agreement to distribute and sell goods in the UK. They disagreed as to the meaning of a term governing the termination of the distributorship.
Held: The court can not take into account the post-contractual conduct or statements of the parties in order to determine the meaning and effect of the contract.
The more unreasonable the result of a particular interpretation of a contract, the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they should make their meaning clear.
The fact that an agreement may be, or prove to be, a bad bargain is not a sufficient reason for supposing that the agreement does not mean what it says.
Lord Reid said: ‘The fact that a particular construction leads to a very unreasonable result must be a relevant consideration. The more unreasonable the result the more unlikely it is that the parties can have intended it, and if they do intend it the more necessary it is that they should make that intention abundantly clear.’
Lord Wilberforce said: ‘The general rule is that extrinsic evidence is not admissible for the construction of a written contract; the parties’ intentions must be ascertained, on legal principles of construction, from the words they have used.’
Lord Diplock said: ‘If detailed and syntactical analysis of words in a commercial contract is going to lead to a conclusion that flouts business common sense it must yield to business common sense.’
Judges:
Lord Reid, Lord Wilberforce, Lord Morris of Borth-y-Gest, Lord Simon of Glaisdale, Lord Kilbrandon
Citations:
[1973] 2 All ER 39, [1973] 2 WLR 683, [1973] 2 Lloyds Rep 53, [1974] AC 235, [1973] UKHL 2
Links:
Jurisdiction:
England and Wales
Citing:
Doubted – Watcham v Attorney-General of the East Africa Protectorate PC 1919
The Watchams held land along the bank of the Nairobi River. It had been conveyed to them by the Crown by a certificate under the East African Land Regulations. The certificate gave the area transferred as ’66 3/4 acres, or thereabouts’, but included . .
Cited – Bettini v Gye QBD 1876
Mr Bettini agreed to sing for Mr Gye in concerts and operas in London between March and July 1875. The contract said he was to be in London ‘without fall’ at least six days before the 30th March for rehearsals. Because of illness, he did not arrive . .
Cited – Whitworth Street Estates (Manchester) Ltd v James Miller and Partners Ltd HL 1970
The parties disagreed as to the curial law of an arbitration agreement. The proper law of the building contract and the arbitration agreement was English but the reference was conducted in Scotland.
Held: Evidence of behaviour after a contract . .
Cited – London Guarantie Company v Fearnley HL 1880
Lord Blackburn said: ‘My Lords, it has long been the practice of companies insuring against fire, for the purpose of their own security, to incorporate in their policies, by reference to their proposals, various stipulations for matters to be done . .
Cited – Attorney-General v Drummond 1842
Lord St. Leonards: ‘ Tell me what you have done under such a deed and I will tell you what that deed means.’ . .
Cited – Glaholm v Hays 1874
A term in a charterparty provided that the vessel was to sail from England on or before the 4th of February. The question which arose was whether that term was a condition precedent upon the non-compliance wherewith the freighters were at liberty to . .
Disapproved – Radio Pictures v Commissioners of Inland Revenue ChD 1938
The court considered whether a particular document could properly be included among the batch of documents which as a whole formed the contract, so that the stipulations therein were themselves contractual. . .
Cited – Foley v Classique Coaches Ltd CA 1934
The sellers had sold to the buyers a piece of land to use in the latter’s business as coach proprietors, and also contracted with them to supply all the petrol required for that business ‘at a price to be agreed by the parties in writing and from . .
Cited – Hong Kong Fir Shipping Co v Kawasaki Kisen Kaisha Ltd CA 20-Dec-1961
The plaintiffs had recently acquired the ship the ‘Hong Kong Fir’ and contracted to charter it to the defendants, but being late in delivering it, the defendants cancelled the charterparty contract. The plaintiffs said the repudiation was wrongful, . .
Cited – WN Hillas and Co Ltd v Arcos Ltd HL 5-Jul-1932
The plaintiff sought to make the defendants responsible for breach of contract for the sale and purchase of Russion softwood timber. The plaintiff said that the defendants had repudiated the contract. The defendants said that it had been cancelled . .
Cited – Wallis v Pratt CA 1910
Fletcher Moulton L.J considered that the first sense of the term ‘condition’ is ‘There are some [obligations] which go so directly to the substance of the contract or, in other words, are so essential to its very nature that their non-performance . .
Mentioned – Wallis, Son, and Wells v Pratt and Haynes HL 5-May-1911
Exclusion Clause Limited
The appellants bought seed from the respondents as ‘common English sainfoin’ under the proviso that ‘sellers give no warranty, expressed or implied, as to growth, description, or any other matters.’ The seed turned out to be a different kind, and . .
Cited – Sydall v Castings Ltd CA 1967
There is a presumption that the words in the contract are used in a sense that they bear as legal terms of art, if they are reasonably capable of bearing such meaning in their context. . .
Cited – Suisse Atlantique Societe d’Armement Maritime SA v NV Rotterdamsche Kolen Centrale HL 1966
No magic in the words “fundamental breach”
There is no rule of law which prevents parties to a contract agreeing to limit their respective liabilities. It is a question of the construction of the particular clause as to whether it applies to a fundamental breach or not. The court doubted the . .
Cited – Shore v Wilson 1842
Parke B said: ‘In the first place, there is no doubt that not only where the language of the instrument is such as the Court does not understand, it is competent to receive evidence of the proper meaning of that language, as when it is written in a . .
Cited – Whitworth Street Estates (Manchester) Ltd v James Miller and Partners Ltd CA 1969
The parties, one in England and one in Scotland agreed to perform certain actions in Scotland. Any dispute was to be settled by arbitration, but it was not said whether this would be in England or Scotland. The curial law of arbitration would decide . .
Cited – Thomson v Weems HL 1884
Where a basis of the contract clause makes the correctness or completeness of the insured’s disclosure into a warranty, a breach of that warranty has the effect that the insurance cover never attaches under the contract.
Lord Blackburn said: . .
Cited – Dawsons Ltd v Bonnin HL 1922
The House considered whether a provision was a warranty rather than a representation, allowing the contract to be avoided for its breach. It was an inadvertently inaccurate statement by the insured in the proposal form which was expressly . .
Cited – WN Hillas and Co Ltd v Arcos Ltd HL 5-Jul-1932
The plaintiff sought to make the defendants responsible for breach of contract for the sale and purchase of Russion softwood timber. The plaintiff said that the defendants had repudiated the contract. The defendants said that it had been cancelled . .
Cited by:
Cited – Blumenthal v The Church Commissioners for England CA 13-Dec-2004
The respondent argued that the power given to the Lands Tribunal by the section, did not extend to a power to vary a positive covenant.
Held: It could not be right to construe the obligation in the lease as a positive obligation rendering the . .
Cited – Tower Hamlets v Barrett and Another CA 19-Jul-2005
The defendant tenants appealed an order for them to surrender possession of land which they claimed had been acquired by adverse possession. The buildings, including one which shared a party wall with the building owned by the defendants had been . .
Cited – G and S Properties v Francis and Another SCS 13-Jun-2001
The pursuers were contracted to sell a property with sole selling rights. The contract was terminable on two weeks notice. Notice was given, and another company engaged. A buyer confused the two agents and obtained details from the pursuer’s office, . .
Cited – Investors Compensation Scheme Ltd v West Bromwich Building Society HL 19-Jun-1997
Account taken of circumstances wihout ambiguity
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 – Ali v Lane and Another CA 21-Nov-2006
The parties disputed the boundary between their neighbouring plots of land.
Held: In the modern law the conveyance (parchment or not) is undoubtedly the starting point. Where information contained in the conveyance is unclear or ambiguous, it . .
Cited – Pratt v Aigaion Insurance Company SA (‘the Resolute’) CA 27-Nov-2008
The court considered the interpretation of a term in a contract of insurance to the effect that ‘Warranted Owner and/or Owner’s experienced skipper on board and in charge at all times and one experienced crew member.’, asking whether ‘at all times’ . .
Cited – Piper and Another v Wakeford and Another CA 17-Dec-2008
The parties disputed the boundary between their land.
Held: The judge had been entitled to rely on the evidence he had accepted, and had been entitled to find on the factual basis asserted. . .
Cited – Stocznia Gdynia Sa v Gearbulk Holdings Ltd CA 13-Feb-2009
Orders were placed for the construction of ships. They were not delivered. The buyer, the defendant, cancelled the orders. The defendants sought the loss of profit. The claimants said they were entitled only to the repayment of instalments. The . .
Cited – Horwood and Others v Land of Leather Ltd and Others ComC 18-Mar-2010
The claimants sought to claim for personal injuries against the defendant company, now in administration, and their insurers using the 1930 Act. The insurers said they were not liable to indemnify the company. The parties disputed the standing of an . .
Cited – Rainy Sky Sa and Others v Kookmin Bank SC 2-Nov-2011
Commercial Sense Used to Interpret Contract
The Court was asked as to the role of commercial good sense in the construction of a term in a contract which was open to alternative interpretations.
Held: The appeal succeeded. In such a case the court should adopt the more, rather than the . .
Cited – Kookmin Bank v Rainy Sky Sa and Others CA 27-May-2010
The defendant bank appealed against summary judgment given on a claim on its obligations under an advance payment bond given to support ship-building contracts.
Sir Simon Tuckey (dissenting) said: ‘There is no dispute about the principles of . .
Cited – AC Ward and Son v Catlin (Five) Ltd and Others CA 10-Sep-2009
The defendant insurers appealed against refusal of summary judgment in its favour in defending a claim under a policy. The claimants premises had been burgled. The insurer said that the claimant had failed to respect warranties given by it as to . .
Cited – Force India Formula One Team Ltd v Etihad Airways PJSC and Another QBD 4-Nov-2009
The parties had entered into a sponsorship agreement, with the claimants undertaking to display the name of the defendants on their car. After the agreement, the claimant company had been taken over by parties with interests competing with those of . .
Cited – Oxonica Energy Ltd v Neuftec Ltd CA 9-Jul-2009
The parties had entered into a patent and know-how licensing agreement, the interpretation of which was now disputed. . .
Cited – Sugarman and Others v CJS Investments Llp and Others CA 19-Sep-2014
The parties were apartment owners in a development, each owning shares in the management company. They disputed the interpreation of the Articles as to whether the owner of more than one apartment was still restricted to one vote at member meetings, . .
Cited – Telchadder v Wickland Holdings Ltd SC 5-Nov-2014
Old breaches did not support possession order
The mobile home tenant was said to have paraded on the caravan park in combat style clothing, and disguising his face, causing fear among the other tenants. He now appealed against confirmation of the order for possession. He said that there had . .
Cited – Arnold v Britton and Others SC 10-Jun-2015
Absurdity did not defeat a clear clause
A standard lease of plots on a caravan park, contained a provision 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: The tenants’ appeal failed . .
Cited – Revenue and Customs v Secret Hotels2 Ltd SC 5-Mar-2014
The Court was asked as to: ‘the liability for Value Added Tax of a company which markets and arranges holiday accommodation through an on-line website. The outcome turns on the appropriate characterisation of the relationship between the company, . .
Cited – Uber Bv and Others v Aslam and Others CA 19-Dec-2018
Uber drivers are workers
The claimant Uber drivers sought the status of workers, allowing them to claim the associated statutory employment benefits. The company now appealed from a finding that they were workers.
Held: The appeal failed (Underhill LJ dissenting) The . .
Cited – Marine Trade Sa v Pioneer Freight Futures Co Ltd Bvi and Another ComC 29-Oct-2009
The parties stood to make substantial losses against each other under contracts for differences after the dramatic fall in the freight market in the financial turmoil of late 2008. . .
Lists of cited by and citing cases may be incomplete.
Contract
Updated: 23 July 2022; Ref: scu.220276
