INTERPRETATION OF CONTRACTS

Transcription

1 INTERPRETATION OF CONTRACTS ISBN Author: Hamid Ibrahim Binding: Softcover/Extent: 532 pp Publication Price: MYR The law is stated as of February 1, 2008 PRINCIPLES & CANONS OF CONSTRUCTION CHAPTER 1 Introduction... 1 Interpretation - Meaning of... 1 Construction -Meaning of... 1 Construction v Interpretation... 2 Construction of Contract v Construction of Statutes... 3 Application of Principles in Construing Statutes... 4 Translation & Interpretation... 5 Interpretation and the Arbitrator... 5 Relevant Date of Interpretation Arbitration Rules - Exceptions... 6 CANONS OF CONSTRUCTION & PRINCIPLES OF INTERPRETATION Introduction... 8 Canons of Construction... 9 Construction of Contract - Question of Law The Principles of Construing a Contract Object of Construction Exercise Determination of Intention of Parties Construction Leading to Unreasonable Result- Intention of Parties Objective Test to be applied in Interpreting Contracts Common Sense Approach Construction of Contract - Ordinary Meaning Process of Construction Parts of a Contract Good Faith Reasonable Business Efficacy Inequality of Bargaining Power - Test of Reasonableness or Fairness COURTS & INTERPRETATION Introduction Construction of Contracts - Approach of English Law... 23

2 Shift from Literal Methods of Interpretation Towards a more Commercial Approach Ratio Decidendi & Judicial Interpretation Duty of Court in Interpreting Contract Courts Strive to Uphold Bargains Interpretation of Document Effect on Interpretation of Another Document Part Performance & Uncertainties - Approach of Courts Construction of Contract s - Summary Determination Summary Judgment - Extrinsic Evidence Appeal Construction of Document Conflicting Evidence Appeal - Use of Contemporary Documentary Evidence COMMERCIAL CONTRACTS Commercial Document Construction of Commercial Document - Legal Principles to be Applied Interpretation of Commercial CCoghlan v Cumberlandontracts - Commercial Purpose of Contract Commercial Contracts - Reasonableness of Construction Commercial Transactions - Business Sense Approach to Questions of Interpretation Purposive Construction of Commercial Documents and Contracts Party cannot take Advantage of His Own Wrong - Legal Presumption Commercial Contracts and Exclusion Clauses Cap Clauses CHAPTER 2 CONSTRUCTION OF CONTRACTUAL DOCUMENTS Principles for Construing Contractual Documents RULES OF CONSTRUCTION Rules of Construction Mere Guidelines Guidelines or Rules for Construing Contracts Golden Rule of Construction Construing a Written Instrument Contract to be construed to make it Operative Document to be Construed as a Whole... 46

3 Concluded Antecedent Agreement Draft Contracts Contractual Term - Contextual Approach to Interpretation Contract in Printed Form -Writing Superadded Effect of Construction of Documents Discernment of Intent True Nature of a Transaction Test to be Applied Labels - Substance of Instrument Sham Document Recitals Recitals and Operative Part of Instrument Recitals & Inconsistencies in Guarantees Meaning of Clause(s) in Contracts Complete and Unambiguous Clauses Unambiguous Documents Ambiguous Documents Admissibility of Subsequent Interpreting Statement Several Documents forming part of one Transaction - Documents to be read Together Document not to have any Legal Effect THE CONTRA PROFERENTUM RULE Interpretation of Documents The Contra Proferentem Rule Document Inter Partes- Ambiguity Contra Proferentum Rule Contra Proferentem Motor Insurance Policy Exclusion Clauses Contra Proferentem Rule MEANING OF WORDS Interpretation of Words General Principles Intention of Parties Meaning of Words - Overriding Objective To Attain the Meaning which the Parties Mutually intended the Words to have Words Meaning of Words Approach of Courts Construction - Composite Exercise Lawful Meaning to be Preferred Words & Clauses Context of Whole Agreement Uniform and Consistent Interpretation - Terengganu State Development Corporation v Nadefin No Requirement of Uniform and Consistent

4 Interpretation of Contractual Words Dictionary Meaning of Words Dictionary Meaning v Context or Background Noscitur a Sociis (A Word is known by the Company it Keeps) Ejusdem Generis Rule (Of the Same Kinds, Class, or Nature) Words Fairly Capable of Bearing More than One Meaning Words Fairly Capable of Bearing More than One Meaning - Context of Transaction Words Capable of Bearing More than one Meaning Extrinsic Evidence Clear and Unambiguous Terms & Purposive Construction Words Ambiguity Ambiguous Language Latent Ambiguity Absurdity Words - Uncertain Meanings Effect of Terms Uncertain Term(s) CLAUSES IN CONTRACTS Clause(s) Interpretation of Clause(s) Document to be Read as a Whole Dispute over the Wordings of a Clause Clear & Unequivocal Clauses Absence of Specific Clause Surrounding Circumstances - Understanding of Parties Inconsistent Clauses Rules of Interpretation Repugnant & Inconsistent Clauses - Words Inconsistent with Main Purpose of Document Interpretation Clause Entire Agreement Clause - Purpose of Entire Agreement Clause Conclusive Evidence Clauses Assignment Clause Principles Applicable Assignment Absolute Assignment Memorandum of Association - Object Clauses Exclusion Clauses Exclusion Clause & Breach of Contract

5 Later Clause Time Time Bar Clauses Time for Performance Technical Terms Technical Terms Expert Evidence Contract Consideration Proof of Right to an Indemnity Plan Annexed to a Conveyance SPECIFIC CONTRACTS Guarantees Guarantee Liberal Construction Guarantees & the Contra Proferentem Rule Guarantees - Certificate of Indebtedness Guarantees - Conclusive Evidence Clause Liability of Guarantor Terms of Guarantee & Intention of Parties Guarantee - Co-Extensiveness between Primary and Secondary Liability - Terms of Guarantee TENANCY AGREEMENT Recitals Tenancy Agreement - Creation of Option to Renew Lease Agreement Various Parts Inconsistencies Effect of Option Tenancy Agreement Uncertainty Whether Term Void for Uncertainty Implied Terms in Tenancy Agreements Tenancy/Licence Exclusive Possession Test Tenancies - Collateral Contracts INSURANCE CONTRACTS Interpretation of Insurance Contract - Sound Commercial Principles Insurance Policies Context Bailee Clause Marine Insurance - Costs of Proceedings against Third Parties Exception Clause in Proviso Motor Insurance Policy Insurance Policy - Basis Clause Clause Exempting Liability for Negligence Ambiguous Words Contra Proferentum Rule Contracts of Insurance

6 Motor Insurance Policy Rules of Interpretation Contra Proferentum Rule PERFORMANCE BONDS Performance Bonds Interpretation of BUILDING CONTRACTS No Special Rule of Construction Final Certificates Building Contract Forfeiture Clause Building Contract - Set Off Right of Set Off EXECUTION OF CONTRACT Party Bound by Signature Failure to Execute Agreement Non Est Factum RECTIFICATION Rectification of an Instrument Mistakes in Agreement Approach of Courts Rectification Conditions Common Mistake Rectification - Standard of Proof Unilateral Mistake Rectification Individual Mistake(s) - (1) Individual, mistake, not known to or induced by the second party (2) Individual Mistake Known to or Induced by the Second Party Rectification - Mutual mistake CHAPTER 3 THE PARTIES AND THE INTERPRETATION OF CONTRACTS Introduction Parties to Decide upon Terms of Contract - Parties Free to Determine their Primary Obligations Proper Law of a Contract DUTY OF PARTIES Duty of Parties to a Contract Duty to Cooperate Duty of Promisee to Cooperate with Promisor Conditional Contract Obligation of Parties

7 Express Agreement between the Parties - Technicality of Misdescription in a Pleading 186 INTENTION OF PARTIES Intention of the Parties Intention Meaning of Manner of Ascertaining the Intention of the Contracting parties Examination of Entire Contract Mutual Intentions of the Parties Intention of Parties Objective Approach Subjective Approach Relevance Subjective Intentions Draft Contracts Intention of Parties Language of Contract & Words Used Process of Interpretation - Language used by the Parties Intention of Parties Meaning of Words Used Intention of Parties Chosen Words Words Used & Intention of Parties Unequivocal Contract Intention of Parties Clear Words Clear and Unambiguous Words and Intention Intention of Parties &Quality of Drafting Written words v Printed Words Further Expressions by Parties and the Process of Interpretation Contract Retrospective Application Party s Intention and Reliance on Wrong Interpretation of Contract Party Cannot Take Advantage of His Own Wrong Legal Presumption Rebuttal of Presumption Intention of Parties & Extrinsic Evidence Written Words v Surrounding Circumstances SPECIFIC CLAUSES IN A CONTRACT & INTENTION OF PARTIES 223 Recitals Construction of Recitals and Intention of Parties Covenants Intention of Parties Time Intention of Parties - Whether Time is of the

8 Essence of a Contract Affirmation or Repudiation Election EXISTENCE OF CONCLUDED CONTRACT CHAPTER 4 Introduction Whether there was a Binding Contract - Question of Expressed Intention Existence of Contract - Surrounding Circumstances & Parol Evidence Rule Set of Documents - Whether a Binding Agreement was concluded on a Set of Documents Correspondence Exchange of Correspondence between Parties Memorandum of Understanding MOU - Nature & Magnitude of Agreement Incomplete Terms - Uncertainty No Contract Document Executed Between the Parties SUBJECT TO CONTRACT Introduction Subject to Meaning of Subject to Contract Rebuttal of Presumption - Requirement of Cogent Evidence Execution of Further Contract Execution of Formal Contract Subject to Ratification Conditional Contract Condition Meaning of Condition Precedent Subject to a Condition Precedent Types of Conditional Arrangements Presence of Essential Elements of an Agreement Absence of Company Stamp Open Contract Subject to the Sale and Purchase Agreement Substantial Agreement Option to be clarified by Both Parties in Two Weeks Upon Such Terms as shall be Determined or Advised by our Solicitors

9 TERMS OF CONTRACT CHAPTER 5 Contractual & Pre-Contractual Statements Terms & Representations Nature of Doctrine of Estoppel & Representations Terms of Contract - Conduct of the Parties & Surrounding Circumstances Specific Term and General Term Contractual Obligations Nature of Contractual Obligations Conditions Conditions or Warranties Condition or Warranty - Materiality of Breach Conditions or Warranties - Test of Essentiality Breach of Contract Importance of Term Whether a Condition or Warranty Fundamental Term Breach of Fundamental Term Obligation to Pay the Purchase Price Breach of Fundamental Term Variation of Terms - Rate of Interest Breach of a Warranty Terms Used in Statute Use in Contract IMPLIED TERMS CHAPTER 6 Introduction Implied term Meaning of Presumption against Implying Terms Interpretation of Contract & Implication of Terms Implied Terms - The Law - Determining Whether a Term is to be Implied Where Terms will not be Implied Tests to be Satisfied Where the Court will Imply a Term - Incomplete Bargain - Criteria to Implying a Term Expressed Terms Implying an Unexpressed Term

10 Implied Terms Absence of Ambiguity Onus on Party who contends that Term is to be Implied Implying Terms and the Parol Evidence Rule Intention of the Parties Business Efficacy & Officious Bystander Test Officious Bystander Test & a Clear & Unambiguous Contract Business Efficacy & Test of Reasonableness Intention of the Parties & the Business Efficacy & Officious Bystander Test Types of Implied Terms First Test Intention of the Parties Second Test or Type of Implied Term Contracts of a Particular Type - Relationship of Parties - Categories of Cases Party s Obligations & Implied Terms Implied Term of Party s Engagement Party to Act Reasonably Implying a Correlative Obligation Prevention of Performance Negative Implied Stipulation Bad Faith Implying Covenants Time Implying a Term Implied Warranty of Fitness Implied Term Goods - Reasonably Fit for Purpose for which it was Acquired Employment Contracts Implied Transferability Clause Utmost Good Faith - Contract of Insurance Guarantee Execution by more than one Guarantor EXTRINSIC EVIDENCE CHAPTER 7 Interpretation of Contracts & Extrinsic Evidence Extrinsic Evidence General Principles Extrinsic Evidence Extrinsic Evidence Inadmissible Ambiguity Admissibility of Extrinsic Evidence

11 Extrinsic Evidence of Objective Matters PRE CONTRACTUAL NEGOTIATIONS 349 Introduction Evidence of Negotiations Interpretation of Contracts Admissibility of Pre-Contractual Negotiations Pre-Contractual Negotiations v Parties Declaration of Subjective Intent Evidence of an Antecedent Agreement Prior Contracts Evidence of Negotiations Leading up to the Final Version of the Contract Ambiguity Pre-Contractual Negotiations & Collateral Contract Rules of Construction - Private Dictionary Principle - Pre-Contractual Negotiations Exceptions Meaning of Phrases - Agreement in Pre-Contract Negotiations SURROUNDING CIRCUMSTANCES Introduction Judicial Opinion - Divergence - Australia Meaning of Surrounding Circumstances Surrounding Circumstances Statutory Background Surrounding Circumstances - Legal Background Insurance Policy Surrounding Circumstances The Context The Background The Factual Matrix Context Meaning of Objective Factual Background Objective Factual Background and the Contracting Parties Factual Matrix Extrinsic Evidence Establishing the Factual Matrix Admissibility of Factual Background Limitations Factual Matrix Prior Contracts Factual Matrix Employment Contracts Factual Matrix - Uncommunicated Intentions or Personal Interpretations Objective Approach of Courts Intention & Prevailing Circumstances

12 Surrounding Circumstances Evidence of Actual Intention of Parties SUBSEQUENT CONDUCT Introduction Subsequent Conduct of Parties Evidence of Course of Dealings between Parties Subsequent Conduct - Estoppel by Convention Estoppel by Conduct Surrounding Circumstances Where Subsequent Conduct May be Relevant Subsequent Documents PAROL EVIDENCE Parol Evidence Rule - Inadmissibility of Evidence Extrinsic to Contract Document Exception to Parol Evidence Rule - True Nature of a Transaction Transaction Evidenced in Several Documents Admissibility of Parol Evidence Statutory Prohibitions Section 92 of the Evidence Act Scope of Section Parol Evidence Rule - Admissibility of Oral evidence Proof of Oral Agreement - Contemporaneous Documents Clear & Unambiguous Words Parol Evidence Exceptions - Sections 91 and 92 of the Evidence Act Where Extrinsic Evidence Admissible Construction of Contracts Evidence of Factual Background Intention to Contract Interpretation v Validity of Contract Extrinsic Evidence Exception to Parole Evidence Rule Factual Matrix of the Case or Surrounding Circumstances Admissibility of Oral Representations Pleadings & Section 92 of the Evidence Act Section 92 and Intention to Contract

13 Section 92 Exceptions Collateral Contracts Approach of the Courts Collateral Contracts Burden of Proof Extent of Collateral Contract Collateral Contracts & the Extrinsic Evidence Rule Collateral Warranty Collateral Warranty - Distinguishing Features of a Collateral Warranty Proviso (f) Exceptions - Any fact may be proved which shows in what manner the language of a document is related to existing facts Ambiguity Section 94 of the Evidence Act 1950Section 94 of the Evidence Act