Contractual Interpretation: A Comparative Perspective

Abstract

Over the last two to three decades there has been a paradigm shift in the interpretation of contracts from text to context. The purpose and surrounding circumstances of agreements are increasingly being considered for interpretation. This article charts the emergence of this approach in English jurisprudence, culminating in Lord Hoffmann’s restatement of the principles in the House of Lords. It surveys the way in which the movement from text to context has been dealt with in a number of jurisdictions, including Australia, New Zealand, England, Hong Kong, Singapore, Malaysia, India, China and the United States. This paper argues that the theoretical distinctions between common law and civil law contractual interpretation are not as significant in practice as they appear in theory. The paper undertakes a detailed comparative study on the current status of the parol evidence rule, the admissibility of evidence of surrounding circumstances, the treatment of evidence of pre-contractual negotiations and of subsequent conduct, the requirement that a written text be ambiguous before resort is had to extrinsic evidence, and the effect of entire agreement clauses on contractual interpretation. Further, it discusses the underused Vienna Convention on Contracts for the International Sale of Goods. The paper argues that the general use of extrinsic materials risks undermining commercial certainty which, in turn, will result in an increase in the cost of commercial dispute resolution and reduce the reliance that third parties can place on a written document.

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