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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

PAGE

87


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

PAGE

88

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)

PAGE

89

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

PAGE

90

*

*

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

PAGE

91

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