Interpreting contracts – Parties’ intentions

Posted: 8th September 2017

AirportThe courts are always keen to give effect to the intentions of the parties within contracts. They are equally reluctant to find that provisions are void for uncertainty.

Those points were made in a case concerning a contractor carrying out major works at the airport which had engaged a specialist subcontractor to design and construct the facility. The work was divided into sections, each of which was to be completed by a deadline date with provision for payment of liquidated damages in the event of delay.

Such delays in fact arose and, although the deadlines were extended by agreement, a dispute ensued as to the operation of the sectional completion dates and delay damages. The matter was referred to an adjudicator, who found that the delay damages provisions were so uncertain in their meaning as to be inoperable and unenforceable. In those circumstances, the contractor issued proceedings, seeking declaratory relief as to the proper construction of the subcontract.

In ruling on the matter, the court noted that what mattered was the intention of the parties by reference to what a reasonable person, with all relevant background knowledge, would have understood from the subcontract’s wording. The delay damages provisions had to be interpreted in the context of the whole subcontract with a view to achieving a harmonious reading of each of its clauses.

Applying those principles, the court found that it was possible to sufficiently identify those works that fell within each of the sectional periods. The delay damages provisions were thus rendered sufficiently certain to be enforceable. The court made declarations in respect of the true meaning of those provisions.