The language used, rather than the surrounding circumstances, provides the most important means of interpreting contracts, Lord Sumption has said.
The Supreme Court Justice, who is due to retire next year, also bemoaned ‘the belittling of dictionaries and grammar’, while giving the annual Harris Society lecture at Keble College, Oxford, this week. Referring to historic trends of contract interpretation, Lord Sumption offered a polite critique of Lord Hoffmann’s ‘broader approach to construction’, in which the surrounding circumstances are used to modify the effect of language, as in Investors Compensation Scheme Ltd v West Bromwich Building Society [1998] 1 All ER 98.
‘Language, [Lord Hoffmann] suggested, was a mere matter of dictionaries and grammar,’ Lord Sumption said. ‘Meaning was something different.’
Lord Sumption disagreed. ‘The language of the parties’ agreement, read as a whole, is the only direct evidence of their intentions which is admissible,’ he said.
‘I would certainly not advocate literalism as an approach to construction. But it is a fallacy to say that language is meaningful only in relation to some particular background … I find the belittling of dictionaries and grammars as tools of interpretation to be rather extraordinary … If we abandon them as the basic tools of construction, we are no longer discovering how the parties understood each other. We are simply leaving judges to reconstruct an ideal contract which the parties might have been wiser to make, but never actually did.’
