Contracts, especially when drafted by people who are not lawyers (and sometimes even when they are) are often not perfect which then leads to those involved getting into a dispute and asking the court to untangle the situation.

Parties will often say ‘that’s not what I meant’ when a particular clause is quoted back to them and they hope that the court will take into account a whole host of external factors when deciding what a contract actually means.

However, when it comes to contractual interpretation, such hope will often be short lived.

How courts approach the issue of interpreting contractual terms has been the subject of numerous decisions by the highest courts in the land.

In short, the court will try to ascertain the intention of the parties by reference to ‘what a reasonable person having all the background knowledge which would have been available to the parties would have understood them to be using the language in the contract to mean’.

The following are crucial factors that the court will take into account:

1. The language used in the contract is of paramount importance
2. The subjective intention of the parties is irrelevant
3. Words should be given their ordinary and natural meaning. The court will not embark ‘on an exercise of searching for, let along constructing, drafting infelicities in order to facilitate a departure from their natural meaning…’
4. Commercial common sense will not be invoked retrospectively, it is only relevant as to what the parties might have agreed at the time the contract was made
5. The court should be very slow to reject the ordinary meaning of words just because it could lead to a very imprudent result for one of the parties

The last point is clearly set out at paragraph 19 of Arnold v Britton [2015] AC 1619:

… The mere fact that a contractual arrangement, if interpreted according to its natural language, has worked out badly, or even disastrously, for one of the parties is not a reason for departing from the natural language…

The above is demonstrative of the benefit of having suitably qualified individuals drafting an agreement. Professionals can ensure an agreement meets the necessary formalities, they can ensure that the agreement covers as many situations as possible and, finally, if there is an error that causes loss, there will be a policy of insurance in place to compensate.

When one considers the starting point that, when you sign a contract, you are bound by it then it becomes even more important to ensure that the contract was drafted correctly in the first place.

If not, it could be a very expensive lesson to learn.

Colman Coyle have a number of specialists who can help with drafting agreements, whether commercial or personal and, if there are issues, we also have the expertise to resolve the matters on your behalf.