Without Prejudice Interpretation – With Prejudice Negotiations
Evidence and Proof, Vol. 15, No. 3, 2011
10 Pages Posted: 17 Feb 2011
Date Written: February 16, 2011
It is well known that the rule that disallows extrinsic evidence to contradict, vary, add or subtract from the terms of a written contract cannot be taken at face value. Evidence may be given of the surrounding facts, the factual matrix, to explain the meaning of the written contract. This may include facts imparted by one party to another. Therefore, judges have to draw a difficult distinction between admissible material which forms part of the pre-contractual negotiations and material which forms part of the pre-contractual negotiations but which is not part of the factual matrix and is not therefore admissible for interpretation. In effect, any part of pre-contract negotiations which a reasonable bystander would regard as relevant to understanding the contract would be admissible for the purpose of interpretation. The recent UK Supreme Court decision in Oceanbulk Shipping and Trading SA v TMT Asia Ltd  UKSC 44,  4 All ER 101 held that a written contract resulting from “without prejudice” negotiations may be interpreted in the same way. This means that anything said during settlement discussions is admissible for the purpose of interpretation provided it is within the permissible factual matrix. It follows that settlement negotiations are now “without prejudice except for interpretation”, with the result that parties have to be much more careful about what they say in the course of settlement discussions.
Suggested Citation: Suggested Citation