Contract Interpretation: The Retreat from Contextualism
Presented by: Dr Catherine Mitchell, University of Birmingham.
This seminar explores the shift back to traditional, or ‘plain meaning’, methods of contract interpretation as represented by the Supreme Court decisions in Arnold v Britton and Wood v Capita Insurance Services. These cases signal a retreat from Lord Hoffmann’s more expansive contextual interpretation method advanced in Investors Compensation Scheme v West Bromwich Building Society.
The paper examines some possible motivations for the shift. More specifically, it argues that the movement to contextual interpretation was a response to the socio-legal critique of contract law, since the contextual approach expands the range of information available to the courts in discharging their interpretative task (e.g., by drawing on more factual and social criteria such as the customs of the trade, previous dealings, understandings generated through the negotiating process). Greater flexibility in interpretation, as well as towards the formation of contracts (e.g., RTS v Muller) and the blurring of doctrinal boundaries (rectification and implied terms), could be regarded as part of a general trend.
This movement has now gone into reverse, arguably due to fears about cost and the belief that a formal contract law is preferred by commercial contractors, making it a more attractive product in a competitive market for law and legal services. Formalism is also reckoned to better protect party autonomy and, as a default position, is easier for the parties to contract around. The paper explores some of the implications of the rise of formalism in contract interpretation and examines its limitations, notably in dealing with complex contracting forms, such as those contracts that combine relational features with formal legal obligations.
School of Law
University of Leeds