WHAT ARE THE RULES FOR THE INTERPRETATION OF CONTRACTS?
The various standard or model forms of building contract and sub-contract in use today are normally documents of long standing and, having been revised over the years, should contain few errors, inconsistencies and ambiguities.
These documents are however individually only one of the number which together form the documentation on which a building contract or sub-contract is based. The other documents are the drawings, schedules, bills of quantities, specification etc and these are not standard documents but are prepared specially for the particular contract.
Problems frequently arise when an ambiguity or vagueness or a question of the interpretation of the true meaning of the contract has to be decided and the parties are in dispute.
The adjudication of such a dispute often presents difficulties and the architect or principal agent or ultimately an Arbitrator or Court is faced with the task of determining what the parties had agreed, either explicitly or impliedly, when they entered into the contract; and, if there has been a genuine misunderstanding, which interpretation should prevail.
The general rules for the interpretation of contract may briefly be stated as follows:
(1) The first consideration is to establish the common intention of the parties. ‘The golden rule, applicable to the interpretation of all contracts, is to ascertain and to follow the intention of the parties; and if the contract itself...affords a definite indication of the meaning of the contracting parties, then it seems to me that a court should always give effect to that meaning' (Joubert v Enslin).
(2) Words are to be given their normal everyday meaning unless it appears quite clear from the context that both parties intended them to bear a different meaning, or if the normal meaning would lead to absurdity. If by trade usage or custom the words have a particular meaning, such meaning may be applied.
(3) Where wording in a contract may be interpreted in more than one way, an interpretation shall be used that makes the contract effective rather than void, illegal or impractical.
(4) A clause which is ambiguous shall be interpreted in such a way as to bring it into harmony with the whole of the contract. A contract must be interpreted as a whole.
(5) Where in a contract a general phrase or word follows a series of specific phrases or words, the general phrase or word is to be restricted in meaning to the same class as the specific phrases or words which precede it. This is the eiusdem generis rule. Thus, where a specification clause refers to ‘enamel, varnish, distemper and other finishes, ‘the term' other finishes' is to be restricted to other types of paint finishes, and not, for instance, to textured plaster.
(6) Words written at a later date take precedence over words written at an earlier date. Words that have been typewritten on a document take precedence over words that have been printed on the document, and handwritten words take precedence over both.
(7) Where none of the foregoing rules assists in the resolution of an ambiguity, the contra proferentum rule should be applied. This rule states that where two different meanings can equally well be ascribed to certain words in the contract, the meaning to be adopted is the one that is least favourable to him who wrote the offending words. The reason for this is that it lay within the power of the author of the contract to employ words that made the meaning clear, and if he failed to do so, he should not profit by his negligence. In the case of building contracts, the author is almost invariably the employer or his agents, the architect, quantity surveyor or engineer, so that where this rule is to be applied, any ambiguity will probably be resolved in the contractor's favour.
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