Lord Hodge's survey of interpretation principles, mixed with a little rectification…

See further DP No 147 Chapter 5, especially paragraphs 5.13-5.16 

Lord Hodge was called upon to interpret the provisions of a commercial agreement in Macintyre House Limited v Maritsan Developments Limited [2011] CSOH 45, 4 March 2011.  The parties to the agreement were in dispute over the VAT treatment of payments made under the contract.  Despite the dispute over the meaning of the contract's terms, there was no dispute between the parties as to the correct legal approach to the interpretation of commercial contracts and the exclusion of pre-contractual negotiations as to an aid of construction: the parties were both content to direct Lord Hodge to the established techniques stemming from Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 WLR 896 and Chartbrook Ltd v Persimmon Homes Ltd [2009] 1 AC 1101.  

Lord Hodge summarizes the relevant principles at paragraph 28:

i) the court should construe individual provisions of the contract in the context of the whole contract;

ii) the court should apply an objective construction by reference to the meaning which a reasonable third party, who is aware of the commercial context in which the contract occurs, would give to the words which the parties have used; and

ii) the court should apply adopt a commercially sensible construction when it is faced with competing interpretations.

Noting that this contract is not an easy one to interpret, Lord Hodge voiced his concerns that the parties had simply given insufficient thought to the expression of their intentions, presumably a common fate in the commercial world.  In the end, Lord Hodge offers an explanation of the terms based on the above approach to interpretation, with the question of rectification left open for future debate.