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GAZETTE
JULY-AUGUST 1981
Judicial Attitudes to the
Construction of Written Contracts
or
. . .for the want of a nail the ship was lost
by
Robert A. Pearse and David Tomkin
Lecturers in Law, University College, Cork
T
HE gradual divagation of English from Irish contract
law is of considerable importance to practitioners in
Ireland, who deal commonly not only with contracts
subject to Irish law, but also with contracts which are
subject to English law and which may be interpreted by
English courts.
The interpretation of written contracts in England has
recently been the subject of judicial attention. The
purpose of this article is to discuss and to elucidate the
differing judicial approaches which have become apparent
and to consider what application they might have in
Ireland.
1. Commercial Contracts
The tendency in construing commercial contracts in
England may be inferred from the attitude of the House of
Lords' recent decision in
A.S. Awilco
v.
Fulvia Spa di
Navigazione
(The Chikuma)
1
in which articulation was
given to the ideal at which courts should aim, in con-
struing common form contractual clauses. It is, Lord
Bridge said:
to produce such a result that in any given situation
both parties seeking legal advice as to their rights
and obligations can expect the same clear and con-
fident answer from their advisers and neither will be
tempted to embark on long and expensive litigation
in the belief that victory depends on winning the
sympathy of the court.
2
The general approach which appears from both this case,
and
Photo Production Ltd. v. Securicor Transport
Ltd.,
3
again a recent decision of the House of Lords, is that the
words of a written contract should be given their ordinary
and natural meaning.
In the
Photo Production
case the appellant company
owned a factory, and in 1968 entered into a contract with
the respondent company for the provision of security
services there. During the course of the provision of these
services an employee of Securicor lit a small fire, which
got out of control, and resulted in a conflagration which
caused the respondents monetary loss to the amount of
£ 6 1 5 , 0 0 0. The respondents sought to avoid liability
relying on a widely drafted exclusion clause.
The House of Lords, in allowing the appeal from the
decision of the Court of Appeal, and upholding the
decision of MacKenna J., indicated that the exemption
clause was clear and unambiguous. It protected the
respondent company from liability.
The court rejected any "artificial" approach to the
interpretation of the contract. It indicated that there was
no justification for interfering with the terms freely
reached by the parties. Referring to the Unfair Contract
Terms Act 1977, Lord Wilberforce said:
It is significant that Parliament refrained from
legislating over the whole field of contract. After
this act, in commercial matters generally, when the
parties are not of unequal bargaining power, and
when risks are normally borne by insurance, not
only
is the
case
for judicial
intervention
undemonstrated, but there is everything to be said,
and this seems to have been Parliament's intention,
for leaving the parties free to apportion the risks as
they think fit, and for respecting their decisions.
4
It will be noted that this proposition is made subject to
qualifications, and further qualifications were expressed in
the speech of Lord Diplock, who, while stating that
"parties are free to agree to whatever exclusion or
modification of . . . obligations they please,"
5
laid down
the following exceptions:—
(1) The agreement must retain the legal characteristics of
a contract.
(2) It must not offend against the equitable rule against
penalties.
(3) Exclusion clauses are to be construed strictly and the
appropriate degree of strictness to be applied to the
construction of exclusion clauses may properly
depend on the "extent to which they involve depar-
ture from the implied obligations."
5
(4) The reasonableness of exemption clauses is a relevant
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