LU4 THEME 1 LO10 – Lecture Notes

LO10: Apply the primary, secondary and the tertiary rules of interpretation and the various steps
applicable to each of the rules.

The questions we must be in position to answer:

What is the primary purpose of interpreting a contract?
How do we give effect to the intentions of the parties?
Give a classification of the rules?
What are the primary rules for interpreting a contract or a clause in a contract?
What are the secondary rules for interpreting a contract or a clause in a contract?
Explain the tertiary rules for interpreting a contract or a clause in a contract?
What happens if despite using all the above rule the court can still not establish the meaning of the words used
by the parties?

ANSWER:
LU4 THEME 1 LO3
CHP 11 PAR 11.3 to 11.7 Pg269 - 281
What is the primary purpose of interpreting a contract?
The primary purpose of interpretation of a contract is:
- to give effect to the intentions of the parties.
How do we give effect to the intentions of the parties?
We ascertain the meaning of words used by the parties by applying rules of contractual interpretation
Give a classification of the rules?
1. Primary
2. Secondary
3. Tertiary
What are the primary rules for interpreting a contract or a clause in a contract?
The primary rules are:
1. First step, to consider the grammatical and ordinary meaning of the words the parties used.

2. The next step is to interpret the wording of a contract in the context of other provisions in the document,
read as a whole - that is, its textual context - so as to give effect to the contract, rather than to make it
ineffectual.

3. If intra-textual treatment does not clearly yield up the intention of the parties, THEN: the interpreter must
look at the extended context to draw useful inferences from the nature of the contract, its purpose and
the background against which it was concluded.
What are the secondary rules of interpretation?
Where the meaning of a contract remains unclear despite application of the primary rules THEN: courts use
various further canons of construction.
Secondary rules include rules or assumptions that:
1. words with a general meaning are restricted when used in association with words relating to a species
of a particular class (the eiusdem generis rule);

2. words are known or understood by the company they keep (noscitur a sociis);

3. written or typed insertions in a printed agreement are interpreted as a more accurate reflection of the
parties' intention than the printed terms;

4. preambles are regarded as subordinate to the operative part of a contract if sufficiently clear; an
ambiguous term should be given a meaning that would make it legally effective (ut res magis valeat
quam pereat);

5. the parties intended their contract to be legal rather than illegal; and

6. the parties intended their contract to have a fair result.

Explain the tertiary rules of contract interpretation
As a last resort, courts may use tertiary rules of interpretation, whose purpose is to provide a fair outcome, rather
than to give effect to the parties' common intention.
The tertiary rules include:
1. the contra proferentem rule, which states that ambiguous terms of a contract are to be interpreted
against the party who proposed them; and

2. the quod minimum rule, which states that ambiguous words must be narrowly interpreted, so a
to encumber a debtor or promisor as little as possible.
What happens if despite using all the above rule the court can still not establish the meaning of the words used
by the parties?
The court will declare the contract void for vagueness.