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.