Neil Andrews, ‘Interpretation Of Contracts And “Commercial Common Sense”: Do Not Overplay This Useful Criterion’

… In Section II, we begin by noting the central features of the English rules governing interpretation of written contracts. Beatson LJ in the Globe Motors case (2016) conducted a thorough review of the modern English authorities and Christopher Clarke LJ’s earlier encapsulation in Wood v Sureterm Direct Ltd and Capita Insurance Services Ltd (2015) has been described as ‘lucid’ and ‘concise’. The position in Australia, Canada, Hong Kong, New Zealand, Singapore and the US would require extensive further discussion. Section III contains analysis of judicial statements concerning C[ommercial] C[ommon] S[ense]. Those statements reveal three main points, which will be developed in Sections IV to VI: (1) CCS not only precludes ‘absurdity’ (Section IV), but (2) it enables the court to select the superior interpretation, when there are rival meanings available (Section V); however, (3) there are four dangers, or causes for concern, which have emerged within the cases (Section VI). First, ‘CCS’ can be used as camouflage for partisan arguments which are really pleas for advantage not truly supported by the document. This card is too often played, sometimes by both sides. Judges should not be beguiled by forensic rhetoric. Secondly, judges should know when they are venturing perilously beyond their mercantile comfort zone: they should not pretend to greater experience than they in fact possess. Thirdly, CCS should not become a pretext for rewriting the text in order to ‘improve’ it. Fourthly, a transaction’s curious or tough wording might be the direct product of close negotiation. That possibility looms large under the English arrangements because courts cannot lift the lid on negotiations. In the face of that possibility, judicial humility and restraint must be shown …

Neil Andrews, Interpretation Of Contracts And “Commercial Common Sense”: Do Not Overplay This Useful Criterion, Cambridge Law Journal Volume 76, Issue 1, March 2017, pp 36-62.

First posted 2017-04-11 12:31:49

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