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Interpretation Of Terms And Construction Notes

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This is an extract of our Interpretation Of Terms And Construction document, which we sell as part of our Contract Notes collection written by the top tier of Griffith University students.

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INTERPRETATION OF TERMS AND
CONSTRUCTION * Construction and Interpretation of a contract
o Construction is the process by which a court determines the:
SS? Meaning and
SS? Legal effect of the terms of the contract 3 step process
1) when did the contract come into being
2) identify the terms of the contract * what is in and what is out
3) figure out what they mean and how they operate When did the
Identify the terms of the contract -
contract come into
what is in and what is out
being? * Something was said * Is the statement in writing?
or written before
o Yes: is there a signature
SS? Yes: signature rule applies,
or during
(whatever you sign is part of the
negotiations - is it
contract)
a term of the
O? THE STATEMENT IS A TERM OF THE
contract?
CONTRACT * Identify when the
SS? No: reasonable notice doctrine
contract came into
applies
being
O? THE STATEMENT IS A TERM OF THE * ANYTHING AFTER
CONTRACT
IS NOT PART OF
o No: Are the statements puffery,
THE CONTRACT
representations or terms?
* * * * What do the terms
mean and how do
they operate
Key principles:
Objective
perspective
Holistic
interpretation
Natural meaning
-- parol evidence rule O? IF THE STATEMENT IS A TERM, IT IS
A TERM OF THE CONTRACT

Objective Approach: * Basic Rule:
o A contract is to be given the meaning intended by the parties * How do we work out the intention of the parties?
o Objectively
SS? As viewed by a reasonable person put into the position of
the parties * Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd * Maggbury Pty Ltd v Hafele Australia Pty Ltd
o What is the meaning of what the parties have said, not what did
they mean to say


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Natural and Ordinary Meaning: * Words are to be given their natural and ordinary meaning
o Codelfa Construction P/L v State Rail Authority of NSW
o Darlington Futures v Delco Australia * The court just gives effect to the words in their natural and ordinary
meaning * Where the language is not clear, the court must determine the intended
obligation * Where a clause is open to two meanings, the court will prefer an
interpretation that avoids unreasonable consequences
o MOST REASONABLE INTERPRETATION
SS? Drew, Robinson & Co v Shearer and Anor * Where there is ambiguity the court will adopt a reasonable interpretation
o Australian Broadcasting Commission v Australasian Performing
Right Association Ltd * Contra preferentum
o Ambiguity is interpreted AGAINST the party relying on the clause
o Proferens is the person relying on the clause
SS? Darlington Futures v Delco Australia
Hollistic Approach: * The contract is considered in context and as a whole
o Codelfa Construction P/L v State Rail Authority of NSW * Natural and ordinary meaning in the context of which the clause appears
in the contract as a whole
o Darlington Futures v Delco Australia * Words are not read in isolation * Consider the factual matrix:
o Background of contract
o Commercial purpose of transaction
o Context
o Market in which the parties are operating * The meaning of the text will consider surrounding circumstances known
to both parties
o Pacific Carriers Ltd v BNP Paribas * Commercial contract: court must be aware of the commercial purpose
which means the court needs to know:
o the genesis of the transaction
o the background,
o the context
o the market in which the parties are operating
SS? Codelfa Construction Pty Ltd v State Rail Authority of NSW


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Parol Evidence Rule
How it works when identifying terms: * Question the completeness of the written document
o Contract partly written partly oral
o Rectification
SS? A term has been omitted in error
o Collateral contract
SS? A separate contract
o Formation issues
SS? Who are the parties
SS? What is the subject
How it works when interpreting terms: * Extrinsic evidence is usually inadmissible in construing a contract in
writing, if the contract is held to be complete
o DTR Nominees Pty Ltd v Mona Homes Pty Ltd and Anor * We can consider extrinsic evidence if we are trying to work out if a
complete and comprehensive contract exists * Ambiguity
o Patent and Latent
SS? Subject matter * White v Australian & NZ Theatres
SS? Identity of parties * Edwards v Edwards
SS? Consideration made * Yaroomba Beach Development Co
Types of Terms: * Promissory Clauses
o Three types
SS? Conditions * A term essential to the contract * The promise is of such importance to the promisee
that they would not have entered the contract unless
they had been assured of strict or substantial
performance of the promise
o Associated Newspapers Ltd v Bancks * Breach of condition = right to automatic termination
SS? Warranties * A term that is subsidiary to the main purpose of the
contract
o Ellul v Oakes * Breach of warranty = right to claim damages (no
right to terminate)


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Innominate/Intermediate Term * A term that is somewhere in between a condition
and a warranty
o Hong Kong Fir Shipping Co Ltd v Kawasaki
Kissen Kaisha Ltd * Breach of term = depends on severity of case
Contingencies
o Where the existence or the operation of the contract is conditional
upon the occurrence or non occurrence of an event
SS? Condition precedent * An event must occur before a contract comes into
existence * If the event does not occur, there is no contract
SS? Condition subsequent * An event that may give rise to a right of termination
of further performance of the contract
SS? Generally the right to terminate lies with the party who was
to receive the benefits
Exclusion clauses
o A term which excludes the liability of a party which would
otherwise arise
SS? Multiple purposes * Exclude one party's liability - EXCLUSION CLAUSE
o Davis v Pearce Parking Station PL * To limit the extent of liability to a maximum amount LIMITATION CLAUSE
o Alderslade v Hendon Laundry Ltd * To make liability subject to certain preconditions
SS?
*
* Interpreting Exclusion Clauses: * Signature
o Is there a contractual agreement?
o Is it in writing?
o If yes, are there signatures?
SS? Yes: Signature doctrine
SS? No: Reasonable notice doctrine
o If no, it is an oral contract * General approach
o The exclusion clause is given its natural and ordinary meaning
o Read in light of the contract as a whole
o Gives weight to the contexts
SS? Darlington Futures v Delco Australia



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*
* Contra proferentem
o Where the meaning of the exclusion clause is ambiguous
o Interpreted against the party relying on the clause
SS? Least favourable meaning for the proferens
Four corners rule
o Exclusion clause will only operate to exclude liability within the
"four walls" of the contract
o Will not operate where proferens has acted in a way that is alien to
the contract
SS? Thomas National Transport (Melbourne) Pty Ltd v May &
Baker (Australia) Pty Ltd
o Parties acting outside the four corners of the contract wont be
protected by the exclusion clause corners
SS? Sydney City Council v West
o FOUR CORNERS RULE IS A GROUNDS FOR DENYING EXEMPTION
TO A PERSON RELYING ON THE CLAUSE BECAUSE THAT PERSON,
WHO IS RELYING ON THE CLAUSE, HAS ACTED OUTSIDE THE
CONTRACT Negligence Clauses * Excluding negligence
o Will be relevant when:
SS? One party alleges that the other has negligently performed
contractual obligations
SS? When one party alleges that the other has breached a term
(express or implied) to take reasonable care in their
performance of contractual obligations
SS? One party claims in negligence rather than in contract * Lister v Romford Ice * Follow the Darlington approach
o Natural and ordinary meaning
o Resolve issue against clause
o If ambiguous, interpret against the inserting party * Must a clause specifically refer to negligence?
o Canada SS Lines Ltd v R
o Clause must refer to negligence specifically








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