Construction cases: Interpretation of contract documents (Investors Compensation Scheme Limited v West Bromwich Building Society, 1998)

Interpretation of Contract Documents

The principles by which contracts should be interpreted have been restated in Investors Compensation Scheme Limited -v- West Bromwich Building Society (1998) 1 All ER 98. As a result, the emphasis is to be on a common sense approach abandoning much of the "intellectual baggage of 'legal' interpretation". Interpretation of a contract should be "the meaning which the document would convey to a reasonable person having all the background knowledge which would have reasonably been available to the parties in the situation in which they were at the time of the contract" with the exception of previous negotiations of the parties and their declarations of subjective intent. Further, whilst adhering to the 'rule' that words be given their natural and ordinary meaning, if the background information would lead a reasonable person to conclude that some mistake had been made with the language, the court would not be obliged to attribute any intention which the parties plainly could not have had.