Contract

The ultimate aim of interpreting a provision in a contract, especially a commercial contract, was to determine what the parties meant by the language used, which involved ascertaining what a reasonable person would have understood the parties to have meant. The relevant reasonable person was one who had all the background knowledge which would reasonably had been available to the parties in the situation in which they had been at the time of the contract. Where the parties had used unambiguous language, the court had to apply it. It was settled law that where a term of a contract was open to more than one interpretation, it was generally appropriate to adopt the interpretation which was most consistent with business common sense. It was not required to conclude that a particular construction would produce an absurd or irrational result before proceedings to have regard to the commercial purpose of the agreement.