Plain meaning of the words not always determinative for commercial contracts
The Dutch Supreme Court decision of 5 April 2013, LJN BY8101 (Lundiform/Mexx), gave an important ruling about the interpretation of commercial contracts that potentially reduces commercial certainty. The ruling reduces the emphasis on the specific wording of a contract, even if it contains an ‘entire agreement clause’, and makes it clear that the courts will consider other factors if it can be shown that the contract does not express the parties’ intentions.
Under Dutch law, if there is a dispute about the meaning of a contract provision, a Dutch court will ascertain this meaning by applying the following standard: what could the parties reasonably have understood that provision to mean and what could they reasonably have expected from each other? For this so-called ‘Haviltex formula’, all facts and circumstances are relevant, including the conduct of the parties before and after entering into the contract. Until recently, for commercial contracts (such as between financial service providers and professional parties), the plain meaning of the words used has been widely regarded as most important when interpreting the contract, even more so if it contained an ‘entire agreement clause’…
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