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Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006] ABC.L.R. 11/22 - page 3 / 5

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Skanska Rashleigh Weatherfoil Ltd v Somerfield Stores Ltd [2006] ABC.L.R. 11/22

  • 17.

    Where I think Skanska's argument faces more difficulty is when one turns to the reference to the June FMA in paragraph 5. Under that paragraph, Somerfield proposed, and Skanska agreed, that Skanska would "provide the services under the terms of the Contract". Reading that phrase on its own at least, it seems to me the natural meaning of the expression, particularly in light of the words that I have emphasised, is that the terms of "the contract", that is the June FMA, will govern the terms upon which the services are to be provided under the temporary arrangement. Although an arrangement that one party will provide to the other "the services under the terms of the contract" could be capable of being limited to identifying the services by reference to the contract, I am firmly of the opinion that that is not the natural or primary meaning the words convey to an ordinary speaker of English, whether a lay person, a businessman or a lawyer. It is not irrelevant to mention that, as I see it, the words "the terms of" would be redundant if what was meant was simply the services as described or identified in the contract.

  • 18.

    It is, of course, very dangerous to construe an expression in isolation. It is trite law that a word or expression used in a contract has to be construed in its overall context. That is the point made in the two cases referred to earlier. This, of course, means that one has to take into account the other provisions of the August letter and the surrounding circumstances in commercial commonsense.

  • 19.

    It seems to me that if one turns to paragraph 2 of the August letter, the natural and primary meaning of the centrally significant word in paragraph 5 is reinforced. That is for two reasons. First, in paragraph 2, the reference to the June FMA was much more limited. As I have indicated, the language used was intended to invoke the June FMA merely in order to identify the services referred to. In other words, the contrast between the way in which the services in the June FMA are linked in paragraph 2 and the way in which they are linked in paragraph 5 reinforces an interpretation which accords with what I consider to be the primary meaning of the word in the latter paragraph.

  • 20.

    Secondly, given that, in paragraph 2 of the August letter, "the services" have already been clearly defined by reference to the June FMA, it is difficult to see as Skanska's case why there is reference again to the June FMA in connection with the services in paragraph 5. The only purpose in that latter paragraph was, as Skanska argues, to identify the nature of the services by reference to the June FMA. Accordingly, in my judgment, at least if one confines oneself to the terms in which the August letter is expressed, it seems to me that it bears Somerfield's interpretation much more satisfactorily than it bears that of Skanska.

  • 21.

    As already mentioned, the interpretation of the provision in the commercial contract is not to be assessed purely by reference to the words the parties have used within the four corners of the contract, but must be construed also by reference to the factual circumstances of commercial common sense. However, it seems to me right to emphasise that the surrounding circumstances and commercial common sense do not represent a licence to the court to re-write a contract merely because its terms seem somewhat unexpected, a little unreasonable, or not commercially very wise. The contract will contain the words the parties have chosen to use in order to identify their contractual rights and obligations. At least between them, they have control over the words they use and what they agree, and in that respect the words of the written contract are different from the surrounding circumstances or commercial common sense which the parties cannot control, at least to the same extent.

  • 22.

    Particularly in these circumstances, it seems to me that the court must be careful before departing from the natural meaning of the provision in the contract merely because it may conflict with its notions of commercial common sense of what the parties may must or should have thought or intended. Judges are not always the most commercially-minded, let alone the most commercially experienced, of people, and should, I think, avoid arrogating to themselves overconfidently the role of arbiter of commercial reasonableness or likelihood. Of course, in many cases, the commercial common sense of a particular interpretation, either because of the peculiar circumstances of the case or because of more general considerations, is clear. Furthermore, sometimes it is plainly justified to depart from the primary meaning of words and given them what might, on the face of it, appear to be a strained meaning, for instance where the primary meaning of the words leads to a plainly ridiculous or unreasonable result.

  • 23.

    I have already referred to the two external commercial factors which weighed with the judge when deciding to adopt Skanska's approach to the construction of paragraph 5 of the August letter. They were: a) the fact that the parties did not want to be bound by the terms of the June FMA; and b) the fact that the June FMA, if executed, would have lasted for some three years, whereas the temporary agreement was only intended to be for a term of two months.

  • 24.

    With due respect to the judge, it seems to me that whether one takes those points together or separately, they do not establish, or even really support, the conclusion that he reached. The parties wished to negotiate about the terms of the June FMA because they did not want to commit themselves to its precise terms for some three years, but this does not mean that they were not prepared to be bound by those precise terms over a short two-month period while the negotiations continued and, hopefully, eventuated into a contract. Accordingly, it appears to me that, contrary to the opinion of the judge, the fact that the parties were not prepared to be bound by the June FMA for a period of three years does not mean that they were not prepared to be bound by it for a much shorter period while they sorted out their longer term agreement. In my judgment, this conclusion is reinforced by the fact that as the negotiations which were going on between the parties at the time of the August letter show, they clearly thought that the June FMA provided a good basis for negotiations as to the terms which would apply for three years, ie that they were content with its general thrust.

Arbitration, Building & Construction Law Reports. Typeset by NADR. Crown Copyright reserved. [2006] EWCA Civ 1732

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