HCA – contracts: construction of terms

Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7

 

FRENCH CJ, HAYNE, CRENNAN AND KIEFEL JJ.

 

35. Both Verve and the Sellers recognised that this Court has reaffirmed the objective approach to be adopted in determining the rights and liabilities of parties to a contract. The meaning of the terms of a commercial contract is to be determined by what a reasonable businessperson would have understood those terms to mean[36]. That approach is not unfamiliar[37]. As reaffirmed, it will require consideration of the language used by the parties, the surrounding circumstances known to them and the commercial purpose or objects to be secured by the contract[38]. Appreciation of the commercial purpose or objects is facilitated by an understanding “of the genesis of the transaction, the background, the context [and] the market in which the parties are operating”[39]. As Arden LJ observed in Re Golden Key Ltd[40], unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption “that the parties … intended to produce a commercial result”. A commercial contract is to be construed so as to avoid it “making commercial nonsense or working commercial inconvenience”[41]

 

 

Bramco Electronics Pty Ltd v ATF Mining Electrics Pty Ltd (No 3) [2014] NSWCA 63

 

Meagher JA at [1]; Barrett JA at [7]; Ward JA at [8]

 

3 The relevant definition is set out by Ward JA at [22]. Its legal meaning is to be determined by application of principles recently summarised by the High Court in Electricity Generation Corporation v Woodside Energy Ltd [2014] HCA 7 at [35]. The present case concerns the interpretation of agreements made to resolve a commercial dispute. In Woodside Energy the majority said, approving the observation of Arden LJ in Re Golden Key Ltd [2009] EWCA Civ 636 at [28], that “unless a contrary intention is indicated, a court is entitled to approach the task of giving a commercial contract a businesslike interpretation on the assumption ‘that the parties … intended to produce a commercial result’”.

 

Reproduced with permission of Robert Sheldon SC

 

David Cormack – Brisbane Barrister.

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