General rules of contract interpretation—summary
Published by a LexisNexis Commercial expert
Practice notesGeneral rules of contract interpretation—summary
Published by a LexisNexis Commercial expert
Practice notes
This Practice Note provides a simplified and brief summary of the general Rules of contract interpretation.
Although there is no simple set of rules to follow in respect of how terms may be construed and interpreted (as much will depend on the individual facts of the case), some General Principles and rules of contract interpretation have been developed by a considerable body of case law. The key cases are discussed below.
Investors Compensation Scheme v West Bromwich Building society
The following five principles set out by Lord Hoffman in Investors Compensation Scheme v West Bromwich Building Society have become the leading statements on the interpretation of contracts:
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it is an objective test as to what a reasonable person, having all the background knowledge reasonably available, would have understood the contract to mean at the time of contracting
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account can be taken of background knowledge and matrix of fact, where such is relevant
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previous negotiations and subjective intent are excluded (with a few exceptions—eg rectification cases)
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the meaning of words used is to be considered in
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