LK Shields Solicitors

Interpreting commercial contracts and drafting tips

By Jennifer McGuire

A client recently said that he doesn’t care if the economy gets better or worse; it’s the uncertainty that makes it hard to take decisive action. This is a fact of business, and as solicitors acting for our clients, it is our job to assist clients to avoid uncertainty. Ambiguity in contracts, unless for a deliberate purpose, is poor drafting.

A court, when asked to interpret a commercial contract, will follow certain principles of interpretation, for example: by putting itself in the position of a reasonable person in possession of the background information reasonably available to the parties, the court will try to ascertain the objective intention of the parties when entering into the contract; and where ambiguity arises in the wording, the court will choose the interpretation that makes the most commercial sense.

It is the natural meaning of the words that applies in the first instance. Commercial sense is secondary and reserved for ambiguities. Therefore, straightforward and simple language will best serve the client. Clarity is certainty…

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