Interpretation of Contracts in Commercial Law: Competing Principles
| Author | Bobby Hussain |
| Position | LLB, LLM Candidate, University of Sheffield |
| Pages | 58-77 |
INTERPRETATION
OF
CONTRACTS
IN
COMMERCIAL
LAW:
COMPETING
PRINCIPLES
BOBBY
HUSSAIN*
Introduction
When opposing
forces
meet
there
is
collision
and
friction.
This
is
how
the
relationship
between
predictability
and
flexibility
has
been
described.
Predictability
and
flexibility
are
principles
of
commercial
law.'
Facets
of
these
principles
include party autonomy, good
faith,
encouragement
of
self-help,
facilitation
of
security interests,
protection
of
vested rights
and
2
the
protection
of
innocent
third
parties.
However,
as
Professor
Robert
Bradgate
states
"these
principles
all
serve the
one end,
of
facilitating
commercial activity
or
as
Lord
Steyn
put
it
to
give effect
to
the
reasonable
expectations
of
honest
people."
3
The
reason why
we
focus
on
the
purpose
of
commercial
law
is
because
we
have great difficulty defining
it
by
any
other
means.
If
we
try
to
define
it
by
its
content
we
find
that
it
ranges
over
"contracts,
supply
of
goods and services,
lending
and
security,
finance,
insurance,
property,
tax,
company
law
and
intellectual property
law."
4
However,
they
can
also
be
treated
as
discrete categories
of
law.
On
the
other hand
we
cannot
define
commercial
law
by
reference
to
other broad
areas
of
law such
as
tort,
criminal
or
equity because
no one
single area
can
adequately
describe
it.
5
Lord
Steyn has
qualified
the
facilitation
of
commercial
law
by
giving
effect
to
the
legitimate
expectations
of
honest
commercial
people,
as
objectively understood.
6
Lord
Goff
illustrates this objective when
he
states,
*LLB,
LLM
Candidate,
University
of
Sheffield.
The
Author
would
like
to
thank
family,
friends
and
the
Trinity
College
Law
Review
for
all
their
help.
A
special
thank
you
goes
to
Fatima
'Bayji'
Bibi.
1
Robert
Bradgate,
Commercial
Law
(3
rd
ed,
Oxford
University
Press,
2000),
at
4.
2
Roy
Goode,
"The
Codification
of
Commercial
Law"
(1988)
14
Monash
University
Law
Review
135,
at
148.
3
Bradgate,
note
1,
at
5.
4
bid,
at
3.
5
Ibid,
at
4.
6
Lord
Steyn,
"Contract
law:
Fulfilling
the
Reasonable
Expectations
of
Honest
Men"
(1997)
113
LQR
433. © 2008
Bobby Hussain
and
Dublin
University Law Society
Interpretation
of
Contracts
[O]ur
only
desire
is
to
give
sensible commercial
effect
to the
transaction.
We
are
there
to
help
businessmen,
not
to
hinder
them:
we
are
there
to
give effect
to
their
transactions,
not
to
frustrate them:
we
are
there
to
oil
the
wheels
of
commerce,
not
to
put
a
spanner
in
the works,
or
even
grit
in the
oil.
7
The crux
of
the
issue
is
that this approach
by
the
courts may
frustrate
one
party's
reasonable
expectations, potentially
resulting
in
economic
loss.
8 This
was
highlighted
by
Professor
Bradgate
who
stated
that
"where
parties
have
contracted
on
the
basis
of
established
rules,
to
not
apply those
rules
will
frustrate
the
reasonable expectations
of
at
least
one
of
the
parties
and
deprive
them
of
the
benefit
of
their
bargain."
9
It
does
not
seem
to
be
appropriate
that
this
should
be
the
case
but
it
may
equally
not
be
appropriate
that
a
contract
should
be
imposed
where
one
party
does
not
want to
continue
contractual relations.
Is
commercial
facilitation
the
correct
way
to
interpret commercial
transactions?
Should
facilitation
be
paramount
regardless
of
the
parties'
intentions?
This article will
attempt
to
show
where
the
law
has
been
predictable, where
it
has
been
flexible,
and
whether
the approaches
examined
are
the ideal
way
to
interpret
contracts.
Predictability
With
facilitation
in
mind,
if
commercial
law
is
predictable
the parties
can
"order
their
affairs" 10
with reference
to
it.
Also, they
can
predict
the
result
of
legal
disputes
and
decide
if
it
is
worthwhile
pursuing
the
claim
or
to
decide
the
matter
amicably.
Both
the
parties
to
the
contract,
as
well
as
the
general
public,
are
more
confident
as
a
result.
The
notion
of
upholding
reasonable
expectations
is
relevant
here,
as
the
law
does
not
want
businessmen
to
lose
confidence,
resulting
in
decreased economic
activity.
1
Goode
states
that
"[als
our
judges
have
said
again
and
again
over
the
past
300
years, it
is
better
that the
law
should
be
certain than that
in
every case
it
should be
just.'
1
2
7
Lord
Goff,
"Commercial
Contracts
and
the
Commercial Court"
[1984]
LMCLQ
382,
at
391.
'Robert
Bradgate,
"Contracts,
Contract
Law
and
Reasonable
Expectations"
in
S
Worthington
ed,
Commercial
Law
and
Commercial
Practice
(Hart
Publishing,
2003)
673.
9
1bid.
10
Roy
Goode,
Commercial
Law
in
the
Next
Millennium
(Sweet
&
Maxwell,
1998),
at
14.
Ibid.
12
Ibid.
2008]
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