Interpreting Contracts—The Price of Perspective

Extract

When a court seeks the meaning of a written contract, it meets a barrier on the outskirts of the document, a barrier imposed by the parol evidence rule. Traditionally, if a court wants to go beyond the barrier for a wider perspective of what the document might mean, it requires a permit on one or more of three grounds. The first is “technicality”: that, although the words appear clear, they have a technical meaning that is not apparent without seeking extrinsic evidence. The second is “ambiguity”: that the words are not clear and the ambiguity must be resolved from a wider perspective. The third is “absurdity”: that a literal reading is not just unreasonable but unworkable or absurd and that that reading must be avoided by taking once again a wider perspective. The perspective is one which takes in the purpose and background (also called the matrix) of the document.