Royal Court Of Jersey Reinforces Guidance On Contractual Interpretation And Formation

• Published date: 29 October 2020
• Subject Matter: Corporate/Commercial Law, Real Estate and Construction, Contracts and Commercial Law, Construction & Planning
• Law Firm: Carey Olsen
• Author: Christopher Tan and John Kelleher

Summary

In the recent judgment of Murray v Camerons Limited,¹ the Royal Court of Jersey made some noteworthy comments on contractual formation and validity, having carefully considered Jersey, English and French jurisprudence. This is of relevance to commercial parties operating in Jersey, particularly in instances where their agreement is not captured in a single written document.

Background

The Plaintiff had engaged the Defendant to build a house. They intended to contract by adopting a JCT standard form contract (being one of several market-standard forms of construction contracts). While a JCT Intermediate Contract was signed to enable the Defendant to carry out the initial work on the project, due to unhappiness over spiralling costs, the actual JCT standard form contract was never signed.² Accordingly, if and how the Defendants might charge for work done was in dispute. Thus the issue became whether and how the JCT standard terms, a Letter of Intent signed by the parties and/or their email exchanges might constitute an agreement.³

Contractual interpretation

The Royal Court held that contractual interpretation relied on establishing the presumed objective intentions of the parties based on the words used, construed against its overall context or 'factual matrix'; ambiguity that cannot be resolved by referring to objective evidence should ordinarily be resolved in favour of commercial common sense.⁴ Further, a document like a JCT standard form contract can be incorporated by reference if expressly referred to in the contractual documents, but the terms in the contractual documents are to be preferred to that of the standard form if they are inconsistent.⁵ The Court then warned against holding that a contract had been agreed if the parties had merely been in negotiations.⁶ Finally, the importance of considering both the words of the agreement themselves and the surrounding context, rather than thinking of them as being alternative considerations, was observed.⁷ Accordingly, the Court concluded that it would first look to the precise phrasing of any clearly-documented agreement, considering the broader context as an aid to interpretation if necessary.⁸The Court commented that the implication of terms into contracts is settled law: terms will only be implied out of necessity.⁹

Contractual formation

Jersey contract law has its roots in Norman customary law, rather than English common law, and therefore has much in common with the French civil law of...