Interpreting Contract Terms in Commercial Litigation: A Pinney Talfourd LLP Perspective

In commercial litigation, the interpretation of contract terms plays a pivotal role in resolving disputes between parties. Businesses often engage in complex agreements and, when conflicts arise, the courts are tasked with unravelling the intricacies of contractual language.

Pinney Talfourd LLP has a wealth of expertise when it comes to navigating contract terms and interpretation.

Clear and Unambiguous Language

A cornerstone of contract interpretation is the importance of clear and unambiguous language (what do the parties to the contract want to agree, and what does the language used mean).

When disputes arise, the legal team at Pinney Talfourd carefully examine the terms of the contract to determine any potential ambiguity and advise upon what the possible outcome might be. If the language is ambiguous, the courts may resort to other evidence, such as the parties’ actual intentions, to clarify the true meaning of the words used.

Implied Terms

Some contract terms may not be explicitly stated; terms may be implied by the courts; by statue; or by custom and practice. 

Under the “business efficacy” test the proposed term will be implied if it is necessary to give business efficacy to the contract (The Moorcock (1889) 14 PD 64).

Under the “officious bystander” test the proposed term will be implied if it is so obvious that, if an officious bystander suggested to the parties that they include it in the contract, ‘they would testily suppress him with a common ‘oh of course’ ” (Shirlaw v Southern Foundries (1926) Ltd [1939] 2 KB 206).  In other words, the proposed term must be so obvious that it goes without saying. 

Terms may also be implied by statute and in commercial contracts, the most common statue which implies terms is the Sales of Goods Act 1979 which implies compliance with description, satisfactory quality, compliance with a sample etc.    

For a term to be implied into a contract, the following conditions must be met: –

• it must be reasonable and equitable;
• it must be necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it;
• it must be so obvious that ‘it goes without saying’;
• it must be capable of clear expression;
• it must not contradict any express term of the contract.

Course of Performance and Course of Dealing

Considering the course of performance and course of dealing between the parties is another important factor when considering disputes in commercial contracts. Understanding how the parties have historically performed under the contract, or how they have engaged in prior dealings, can be instrumental in ascertaining their intentions.

Consequences of Breach and Limitation Clauses

When representing clients in commercial litigation, Pinney Talfourd LLP pays special attention to the consequences of breach and limitation clauses within contracts. These clauses often define the remedies available to the parties in the event of a breach of contract terms and set out limitations on liability.

The legal team at Pinney Talfourd carefully analyse these provisions to ensure that the parties’ rights and obligations are clearly defined and enforceable in accordance with the contractual terms.

Conclusion

In commercial litigation, the interpretation of contract terms is a potentially complex and intricate process. Pinney Talfourd LLP, with its extensive experience and expertise, navigates these complexities, ensuring that clients receive the most favourable outcomes. By focusing on clear language, implied terms, industry practices, and legal doctrines, Pinney Talfourd offer an invaluable insight into the interpretation of contract terms for effective representation in litigation. 

Our Commercial Litigation Team regularly act for corporate clients based in Essex and London and further afield.  If you or your business need specialist advice, please contact Nick Hatchett or Emma Hardie on 01708 229 444 or by email Nicholas.hatchett@pinneytalfourd.co.uk and Emma.hardie@pinneytalfourd.co.uk.