Striking a Balance in Contract Interpretation: The Primacy of the Text

Abstract

In Wood v Capita Insurance Services Ltd [2017] AC 1173, the UK Supreme Court emphasised that contract interpretation involves ‘striking a balance between the indications given by the language and the implications of the competing constructions’. This paper investigates the nature of the balancing act at the heart of construction. It argues that the balancing exercise is easier to comprehend if construction is understood in a particular way, namely, as a technique employed to infer objective intention from the choice of words in a contract. The admissible factors—ie, the potential meanings for the words, the background, the purpose of the contract and the consequences of the potential interpretations—serve as indicators of intention. The composition and relative strength of the competing considerations ultimately determines the resolution of the dispute. Often, the objective intention of the parties is found in the complexities and implications of the contract text.

Keywords: Contract, interpretation, construction, logic, inference, balancing act

JEL Classification: K12