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Pedantry or precision?

There is an old joke:  how many lawyers does it take to change a light bulb?  Answer:  what do you mean by “change”?  We are often accused of pedantry but it is actually important to know what a contract means.

The obvious answer is to spell out what we mean.  But that is not as easy as it sounds and the law reports are full of instances where drafting that seemed clear at the time looks ambiguous with hindsight.  The question is whether the courts should interpret literally or purposively. Which is more important: certainty or fairness?

In Sirius International Insurance v FAI General Insurance Lord Steyn said at paragraph 19:

The tendency should… generally… be against literalism… in The Works of William Paley… The tyrant Temures promised the garrison of Sebastia that no blood would be shed if they surrendered to him. They surrendered. He shed no blood. He buried them all alive. This is literalism. If possible it should be resisted in the interpretative process.

In Midland Expressway v Carillion a contract provided for a provisional sum to be replaced by an actual sum that should be paid to a contractor. The contract did not go on to say that the provisional sum should be removed.  Interpreted literally, the contract would entitle the contractor to be paid the provisional sum plus the actual sum.  The Court of Appeal said that although the expression “provisional sum” was not a “term of art” it was generally understood in the industry and its use revealed the intent of the parties.

We have even seen this develop into the concept of a “private dictionary” where words mean what the parties understood them to mean, which may not be what they would mean to the general reader.

For more thoughts on the “private dictionary”, literalism and purposive construction, see my article, but do post your views here.

2 thoughts on “Pedantry or precision?

  1. Nicholas Baatz QC gave a stimulating talk on construing construction contracts yesterday at a joint SCL/Tecbar meeting. The talk considered the admissibility of extrinsic evidence when construing a contract (that is, evidence relating to the circumstances in which a contract is agreed and operates). This is an issue that relates closely to the points discussed in Edward’s post and related article. If literalism isn’t a perfect solution, then what evidence should be considered when interpreting a contract?

    The two cases highlighted by Nicholas Baatz were Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Chartbrook Ltd v Persimmon Homes Ltd and anor [2008] EWCA Civ 183.

    Chartbrook, in particular, shows the courts recognising the dangers of a purposive approach (as highlighted by Edward in his article). In Chartbrook, the Court of Appeal refused to interpret a contract in such a radical way that it amounted to rectifying, or effectively re-writing the contract. This was despite the fact that the extrinsic evidence supported such a conclusion.

    There is, quite sensibly, a limit to how far the courts will bend the literal meaning of a contract. Nicholas Baatz’s conclusion last night echoed Edward’s: literalism isn’t always fair, but the alternative is often unattractive and reduces the legal certainty on which commercial life depends.

  2. There is no greater foe to impartial aspiration for the truth, and a valid understanding of reality, than literalism. It is the enemy of free enquiry, of genuine spiritual aspiration, and of any effort to better the world on any level.

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