Contractual interpretation

The leading statement on interpretation of contracts is Lord Hoffmann’s statement in Investors Compensation Scheme v West Bromwich Building Society:

'Almost all the old intellectual baggage of ‘legal’ interpretation has been discarded. The principles may be summarised as follows:
(1) Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
(2) The background was famously referred to by Lord Wilberforce as the “matrix of fact”, but this phrase is if anything an understated description of what the background may include. Subject to the requirement that it should be reasonably available to the parties and to the exception mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man.
(3) The law excludes from the admissible background the previous negotiations of the parties and their declarations

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