When Will The Courts Apply 'Business Common Sense' In Contract Interpretation?

Ace Paper Ltd v Fry and others [2015] EWHC 1647 (Ch), 18 June 2015

Summary

Where wording in a contract was genuinely ambiguous causing one interpretation to be absurd, and another to be unlikely in the commercial context, the contract was interpreted to reflect business common sense.

Background

To what extent should the courts apply commercial reasonableness or apply the natural meaning of the wording as drafted and agreed by the parties? It is not always clear what is meant by wording in a contract. Courts have to, in such an instance, interpret the meaning.

The Supreme Court recently placed emphasis on giving effect to the natural meaning of wording, in Arnold v Britton and others [2015] UKSC 36, where it was reasoned that the fact that an arrangement has worked out badly or even disastrously is not a reason for departing from the natural meaning of the language.

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