General principle
• Necessary to construct
o i.e construe
• Meaning of a term (as question of fact)
• Legal effect (as question of law)
▪ Significance
• General rules developed by courts to assist ^
o Overarching principle
• Courts objectively determine meaning and give effect to intention of parties
where possible
o Intention must be ascertained on legal principles of construction from words used
• L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235
o Objective approach emphasises what parties actual said vs what they meant to say
• Court will objectively determine and give effect to intention of parties
o NOT destroy bargain
o Courts must not be too astute or narrow
o Hillas v Arcos
• Construe doc as a whole
Starting point to interpreting and construing
• Interpret words according to plain and ordinary meaning
o Codelfa
• Consideration given to context in which term was used in contract as a whole
o Consider surrounding terms
o Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Codelfa Per
Mason J
Parol evi rule
• Contract wholly in writing = prevents extrinsic evi that has effect of varying from written doc
o Intention of party ascertained from four corners of docs
• Allen v Carbone (1975) 132 CLR 528, 531
o Doesn't apply to partly oral / partly in writing contracts
• Aus position is narrrower than UK
o UK - all surrounding circumstances can be considered
• Penn v Simmonds [1971] WLR 1381
o Aus - 'true rule' = evi surrounding circumstances is admissible to assist interpretation
if lang is ambiguous or can have more than one meaning
• Not admissible to contradict contract when it has no ambiguity
• Mason J in Codelfa
Exceptions to rule
Absurdity
• Literal construction of words create an absurd outcome, courts can ignore it to give effect to
what parties objectively intended
• Maggbury v Hafele
o Absurd requirement to uphold confidentiality when it's public info
Ambiguity
• Where literal meaning creates ambiguity, court will
o Consider most reasonable interpretation in circumstances
• ABC v Australasian Performing Right Association Ltd (1973) 129 CLR 99
o Construe clause contra proferentem
• Necessary to construct
o i.e construe
• Meaning of a term (as question of fact)
• Legal effect (as question of law)
▪ Significance
• General rules developed by courts to assist ^
o Overarching principle
• Courts objectively determine meaning and give effect to intention of parties
where possible
o Intention must be ascertained on legal principles of construction from words used
• L Schuler AG v Wickman Machine Tool Sales Ltd [1974] AC 235
o Objective approach emphasises what parties actual said vs what they meant to say
• Court will objectively determine and give effect to intention of parties
o NOT destroy bargain
o Courts must not be too astute or narrow
o Hillas v Arcos
• Construe doc as a whole
Starting point to interpreting and construing
• Interpret words according to plain and ordinary meaning
o Codelfa
• Consideration given to context in which term was used in contract as a whole
o Consider surrounding terms
o Darlington Futures Ltd v Delco Australia Pty Ltd (1986) 161 CLR 500; Codelfa Per
Mason J
Parol evi rule
• Contract wholly in writing = prevents extrinsic evi that has effect of varying from written doc
o Intention of party ascertained from four corners of docs
• Allen v Carbone (1975) 132 CLR 528, 531
o Doesn't apply to partly oral / partly in writing contracts
• Aus position is narrrower than UK
o UK - all surrounding circumstances can be considered
• Penn v Simmonds [1971] WLR 1381
o Aus - 'true rule' = evi surrounding circumstances is admissible to assist interpretation
if lang is ambiguous or can have more than one meaning
• Not admissible to contradict contract when it has no ambiguity
• Mason J in Codelfa
Exceptions to rule
Absurdity
• Literal construction of words create an absurd outcome, courts can ignore it to give effect to
what parties objectively intended
• Maggbury v Hafele
o Absurd requirement to uphold confidentiality when it's public info
Ambiguity
• Where literal meaning creates ambiguity, court will
o Consider most reasonable interpretation in circumstances
• ABC v Australasian Performing Right Association Ltd (1973) 129 CLR 99
o Construe clause contra proferentem
