The principles of construction are consistent for both simple contracts and contracts under seal.
The fundamental rule is that the court must give effect to the expressed intention of the parties, interpreting the words used without delving into the parties’ motives or mental states (see Inland Revenue Commissioners v. Raphael and Prenn v. Simmonds).
Courts typically rely on the ordinary meaning of words, unless they are technical or scientific. However, the aim is to discern the parties’ intentions rather than engage in mere semantic exercises. As stated in Lloyd v. Lloyd by Lord Cottenham, if the provisions are clear and unambiguous, they must prevail; but if contradictory, the court will prioritise the intention evidenced by the parties.
When construing specific terms, the entire contract must be considered. Even in the absence of ambiguity, the court must enforce the parties’ intentions, regardless of any perceived harshness.
For instance, in Trollope and Colls Ltd. v. North West Metropolitan Regional Hospital Board, despite a delay in phase 1 completion, the court refused to extend the time for phase 3 completion beyond what was clearly specified in the contract.
Manuscript changes in contracts are given precedence over printed terms in cases of ambiguity (see Sutro & Co. v. Heilbut Symons & Co.). Similarly, inconsistencies between figures and words are resolved by giving weight to the words (Saunderson v. Pier).
In situations of internal inconsistency within a contract, absent a clear resolution, the court seeks to uphold the part expressing the parties’ true intention (see Walker v. Giles).
When the contract’s language reveals a clear intention, courts take an interventionist stance to ensure that intention is honoured. For instance, in Gwyn v. Neath Canal Company, the court supplied missing terms to align with the discerned intention.
Similarly, in Mourmand v. Le Clair, the court inserted ‘pounds’ after ‘seven’ to clarify the installment repayment terms. In Simpson v. Vaughan, the court struck out ‘never’ from an acknowledgment of debt, aligning it with the debtor’s actual obligation.
Parol evidence rule
When parties clearly intend their entire agreement to be documented in one or more written records, the parol evidence rule bars them from using external evidence to alter its terms. For instance, pre-contractual negotiations cannot be introduced as evidence.
This rule encompasses both oral and written evidence, such as letters and meeting minutes. While not absolute, exceptions exist as courts take a pragmatic approach to contract interpretation. Specifically, in cases of ambiguity, courts may examine the broader context, including surrounding circumstances and the commercial intent of the agreement, known as the contract’s “matrix.”
Recitals
Recitals serve as introductory statements in written agreements or deeds, summarising the parties’ intentions. Typically positioned between the phrases ‘whereas’ and ‘now it is hereby agreed as follows,’ recitals precede the operative or main conditions of the agreement.
In cases of ambiguity or uncertainty regarding the main conditions, courts may refer to the recitals to discern the parties’ intentions. Additionally, the intentions expressed in the recitals can influence the court’s decision on whether to imply terms into the agreement.
Ejusdem generis
The ejusdem generis rule is a principle of interpretation stating that when a contract condition or clause lists specific items to create a common category, followed by general words, the courts will interpret the general words narrowly, limiting them to the common category. For instance, if a list of deleterious materials is followed by the phrase ‘and all other deleterious materials,’ the general words will be narrowly construed.
Contra proferentem
The Contra proferentem rule states that in cases where the language of an agreement is ambiguous or uncertain, the contract should be interpreted more unfavourably against the party who provided the wording rather than the other party.
The Housing Grants, Construction and Regeneration Act
The Housing Grants, Construction, and Regeneration Act 1996, also known as the Construction Act, aims to ensure prompt payments throughout the supply chain and swift resolution of disputes.
Key provisions of the Act include:
- Entitlement to receive interim, periodic, or stage payments.
- Right to be notified of the amount due or any amounts withheld.
- Authority to halt work due to non-payment.
- Access to adjudication.
- Prohibition of “pay when paid” clauses.
The Act covers all contracts involving “construction operations,” including construction contracts and consultants’ appointments. Failure to comply with the Act results in the application of the Scheme for Construction Contracts.