Some Fallacies Concerning the Law of Contract Interpretation

Abstract

This article seeks to refute several basic propositions concerning the law of contract interpretation that have recently been put forward by academic commentators, some of which gain implicit support from an extra-judicial speech by Lord Sumption earlier this year. These propositions are: the very purpose of a written contract dictates the existence of a plain meaning rule; evidence of prior negotiations is necessarily irrelevant; the explanation for allowing evidence of trade usage or custom to override plain meaning is that the document was not intended to contain the whole contract; the ICS principles are inherently flawed; the “assimilation” theory on which the principles are based is also flawed; recent decisions of the UK Supreme Court demonstrate that the principles have been abandoned and that, as a result, Lord Hoffmann’s legacy in the area of contract interpretation has ended; and this development is to be welcomed because it has the benefits of increased certainty, cost savings and greater protection for third parties.

Keywords: Contract, Interpretation

JEL Classification: K12