The Interpretation of the Contract Chapter 17.1 The Interpretation of the Contract

Partly oral and partly written The form of contracts Deeds Simple Contracts In the form of a deed Wholly written Partly oral and partly written Oral Deeds and simple contracts revise material in Chapters 12 and 13. In the case of simple contracts a reminder that form is not generally a requirement for simple contracts. The rules of interpretation apply to deeds as well as to simple contracts.

Proof of contents of a contract The production of the deed Deeds Terms of contracts in writing are proved by the written document Simple Contracts Contracts partly in writing and partly oral by written document and oral evidence While in the context of problems posed in assessments proof of facts given is not an issue, in practical terms proving what was agreed can be crucial and a written record can be a great saver of time, money and tears. The proof of the terms of written contracts leads to a consideration of the the parol evidence rule Terms of oral contracts by oral evidence

Written contracts – the Parol evidence rule While the rule seems to have more exceptions than most it is nevertheless recognised by the courts in New Zealand

Parol evidence cannot be admitted to vary or contradict a deed or other written instrument. The quote continues “Accordingly it has been held that … parol evidence will not be admitted to prove that some particular term which had been verbally agreed upon, had been omitted, (by design or otherwise) from a written instrument constituting a valid and operative agreement between the parties”. This may be important in relation to employment agreements but the point can be stressed that it is unwise to sign an agreement that does not accurately state what has actually been agreed. Jacobs v. Batavia & General Plantation Trust [1924] 1 Ch 287, 295

True exceptions to the parol evidence rule Where the whole contract is not in fact in writing. Where the contract is not an accurate record of the agreement which the parties had already made. Where the contract is void or voidable - to show this, oral evidence of fraud, duress etc. may be led.

True exceptions to the parol evidence rule (continued) Where the contract was subject to a condition precedent. To show that the contract has been discharged or some of its obligations waived. To prove a collateral contract.

Parol evidence as an aid to interpretation To explain a latent (hidden) ambiguity. To explain a usage or custom of the trade. As noted in the text these are not true exceptions to the rule as they are not intended to change what is said in the contract but to show what the terms actually mean. Where the parties have signed a contract with a patent ambiguity the courts will not hear evidence to explain it.

Interpreting the contract - The rules of construction The rules for interpreting a contract are not dissimilar to the rules of statutory interpretation. In both the task is to give an exact meaning to what was expressed in an inexact medium.

The rules for construing a contract The plain meaning rule – where it is clear that the meaning of the words is the meaning to be given. The whole tenor of the document can be used to determine the meaning of particular words or phrases. Obvious mistakes in spelling or grammar will be corrected or ignored. The eiusdem generis rule applies to the interpretation of contracts. 1, 2 and 4 apply equally to the interpretation of statutes with 2 being equivalent to the purposive approach.

The rules for construing a contract (continued) Where possible ambiguous or doubtful words will be interpreted to support the contract rather than to invalidate it. Where words can have two meanings the courts will give the meaning least favorable to the party who drew up the contract (contra proferentum). Time – in commercial contracts stipulations as to time are treated as being “of the essence of the contract” .

Implied Terms When can the courts imply terms in contract?

When can the courts imply terms in contract? Terms may be implied: By custom. By statute. To give business efficacy to the contract.