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van Schalkwyk, Sybrand --- "Subsequent Conduct as an Aid to Interpretation" [2000] CanterLawRw 7; (2000) 7 Canterbury Law Review 541


SUBSEQUENT CONDUCT AS AN AID TO INTERPRETATION

Sybrand van Schalkwyk[*]

1. Introduction

Contract law is fundamental to the conduct of business in the modern world. The business community relies on the body of contract law to enforce promises when disputes arise. The court has to be able to understand a promise before it can be enforced. This raises the problem of interpretation. The interpretation is fundamental to the fair resolution of the dispute. There are two approaches to this fair resolution. The first holds that it is only fair that parties are bound by the meaning of their words because this is what the parties agreed to be bound by. The second tries to attain a fair resolution by imposing, with the help of hindsight, what seems to be a fair interpretation of the meaning of the words. Subsequent conduct is imperative in the second approach while it is superfluous in the first. The fair resolution of a conflict by taking into account all the factors makes the second approach sound very attractive. In fact both approaches aim at the fair resolution of the conflict. The major difference between the two approaches is that the first approach takes into account the fact that the parties intended to be bound by their ordinary meanings and the second approach ignores this fact. This leads to two compelling reasons for not allowing subsequent conduct to play a role in the interpretation of contracts.

The first reason is that subsequent conduct can add nothing to the interpretation process. The interpretation process is concerned with the intention of the parties as apparent from their words.[1] It does not look at what the parties meant to say but rather at what they are understood to have said. Parties will only act according to their own understanding subsequent to the contract. Subsequent conduct can therefore be of no use in the interpretation process. One way of circumventing this argument is to suggest that the current interpretation process is wrong. Professor McLauchlan has argued forcefully that this is the case and has suggested a new approach to interpretation.[2] The viability of this approach will be analysed in the light of its conceptual base and its impact on the Contractual Mistakes Act 1977.

The correlation with the present approach to statutory interpretation and its implications for the parol evidence rule will also be analysed.

The second reason against allowing subsequent conduct, as a part of the interpretation process, is that it has the potential to cause contractual uncertainty. This can be illustrated by analysing the conceptual questions underlying the law of contract.

In the light of these problems it seems that reform is an appropriate solution. The question relating to subsequent conduct has been left open by the Court of Appeal on several occasions. This has caused confusion in the lower courts[3] and it is suggested that the legislature should regulate the area. The problem of interpretation already exists in relation to the Contractual Mistakes Act 1977.[4] It is therefore suggested that the legislature should insert a section into the Contractual Mistakes Act 1977 relating to the interpretation of contracts. In the case of mistake the court has to establish whether a contract exists before it can establish what remedy to apply. The court also has to establish the meaning of the terms of the contract. At present the courts follow the Common Law approach to interpretation. As this approach does not make clear the position on subsequent conduct, it is desirable for Parliament to make it clear.

II. Objective and Subjective Approaches

1. The Objective Approach

This part of the paper seeks to outline the current approach to contract interpretation as can be discerned from recent cases. It also seeks to outline the reasons for such an approach and what the impact of the approach is on subsequent conduct.

The plain meaning rule or objective approach[6] to interpretation is essentially concerned in establishing what the meaning of contractual terms is through the application of well-established rules of interpretation. This is the approach that currently enjoys favour in the New Zealand courts.[7]

The New Zealand approach is derived mainly from English cases.[8] The statement in Prenn v Simmonds[9] is most often cited as authority for the approach. In this case Lord Wilberforce held that:[10]

We must inquire beyond the language and see what the circumstances were with reference to which the words were used, and the object, appearing from those circumstances, which the person using them had in view.

Lord Wilberforce then went on to say in relation to the intention of the parties:[11]

In my opinion, then, evidence of negotiations, or of the parties' intentions... ought not to be received and evidence should be restricted to evidence of the factual background known to the parties at or before the date of the contract, including evidence of the 'genesis' and objectively the aim of the transaction.

Fisher J has recently outlined the principles of interpretation in the case of McLaren v Waikato Regional Council[12] . In this case it was held that when interpreting a contract the document must be construed as a whole in order to ascertain the true meaning of its several clauses. The court is not entitled to consider antecedent acts or correspondence except for establishing what facts were within the natural contemplation of the parties. The subjectively considered intentions and meanings of the parties before, during and after the contract are irrelevant. If the document is ambiguous the factual background known to the parties by the date of the contract, including an objective assessment of its apparent genesis and aim, is relevant. The court may have regard to the pre-contract communications between the parties, not for the purpose of ascertaining their intentions but to assist in ascertaining those facts that must have been within their mutual contemplation when the contract was entered into.[13]

Justice Fisher makes it clear that the court is not interested in the parties' subjective intentions. The court is interested in finding the meaning of the terms of the contract as they appear from their general context. Another way of putting this approach is:[14]

The question to be answered always is 'What is the meaning of what the parties have said?' not 'What did the parties mean to say?'... it being a presumption juris et de jure... that the parties intended to say that which they have said.

The reason for this complex approach is quite simple.[15] The reason lies in first principles of language and communication. The first point to make is that humans are beings with independent thought patterns. One human cannot read the mind of another. Hence we have language. Language is the method used for expressing thought in a comprehensible manner, that is, comprehensible to other humans. The only way a thought can be

communicated is when one party translates their thoughts into words and another party, the receiving party, translates these words back into thought.[16] In order for this to happen there has to be a standard or recognised way of translating thoughts into words. This standard way of translation is known as language. In order for the standard way of translation to have any utility it has to be objective. The following sets out what is meant by objectivity:[17]

Objectivity in the law connotes standard. It implies that an interpretation can be measured against a set of norms that transcend the particular vantage point of the person offering the interpretation. Objectivity implies that the interpretation can be judged by something other that one's own notion of correctness. It imparts a notion of impersonality. The idea of an objective interpretation does not require that the interpretation be wholly determined by some source external to the judge, but only that it be constrained. To explain the source of constraint in the law, it is necessary to introduce two further concepts: one is the idea of disciplinary rules, which constrain the interpreter and constitute the standards by which the correctness of the interpretation is to be judged; the other is the idea of an interpretive community, which recognises these rules as authoritative.

The first requirement for translation or interpretation is objectivity. An underlying precept of contract law is the concept of consensus ad idem, translated as 'the meeting of the minds'. That is, one party must understand and agree to the thought of the other party. In coming to an understanding, parties have to use language to convey their mindset. On the strength of these communications an agreement may be reached and a contract comes into being.[18]

Because the parties use language to express their thoughts and because there is no other way to gauge their thoughts, the language used must be taken to have represented their thoughts. The result of this reasoning is that the court is not interested in the parties' actual intention, but rather in what the parties had represented their intention to be.[19]

To conclude this section we have to make the following observations. The court employs a method of interpretation that is concerned with the objective meaning of the contractual terms. The subsequent conduct of the parties will only show the parties' subjective understanding. Subsequent conduct therefore has no place in the interpretation process.[20]

2. The Subjective Approach

In order to justify the present approach to interpretation it is necessary to undertake a critique of an alternative approach that has been promoted by Professor McLauchlan[21] in a recent article. In his article Professor McLauchlan challenges the court's continued adherence to the plain meaning rule of contract interpretation. The article suggests that this plain meaning

rule is outdated and should be replaced by an interpretation process that is not biased by misconceived conceptions such as certainty of meaning of language, the scope of the parol evidence rule, and the requirements of the objective theory of contract.[22]

The subjective approach would simply have the court look at the actual mindsets of each of the parties at the time the contract was made.[23] This mindset can be established by having regard to the words' ordinary meanings and where appropriate to the subsequent conduct of the parties.

There are many problems with the subjective approach promoted by Professor McLauchlan.[24] Before analysing these problems it becomes necessary to examine the approach outlined by Professor McLauchlan in detail.

The first premise of the subjective approach is that no words have a fixed or settled meaning. It is argued that it is rather some person who gives them a meaning. There is either a person who uses the words to convey his or her meaning or there is a person who hears or reads them and gives them a meaning of his or her own.[25] In support of this contention the statement by Holmes J is quoted:[26]

A word is not a crystal, transparent and unchanged, it is the skin of a living thought and may vary greatly in color and content according to the circumstances and the time in which it is used.

The approach asks the question: whose meaning is it the object of the law to give effect to?[27] It is argued by Professor McLauchlan that in the case of contract the answer is the meaning attached by the parties or, if the parties attached different meanings, the meanings of one party where, at the time of the agreement, the other party knew or had reason to know of this meaning.[28]

The second contention of the approach is that where words do have ordinary meanings this is strong evidence that the parties adopted these meanings. It is also contended that the court should have regard to the subjective meanings of the parties.

The first conceptual problem to deal with is that inherent in the contention that no words have fixed or settled meanings. If no words have fixed or settled meanings then how can they be used to convey a message? If words do derive their meanings from people then one word can have several different meanings in precisely the same context. It would be impossible to find out what the meaning was if the meaning was totally dependent on the individual using the word. To state that the subjective approach to interpretation will work is tantamount to stating that people can read each other's minds. The reason is that under the subjective approach the distinction between words and thoughts is blurred. Words are not thoughts. Words are merely an understandable way of presenting thoughts.[29] Words can only be understood if they carry some meaning separate from the person using them. This meaning should be ascertainable through the application of standard practices of interpretation.

The quotation by Holmes J above serves as an illustration of this approach. In the judgment the quotation is taken from, Holmes J was contemplating whether a word would have the same meaning if found in state legislation as it had in the United States Constitution. The quotation merely illustrates that the same word can have a different meaning in a different context.[30]

The second point is made in the form of a rebuttal of the argument by Professor McLauchlan relating to trade usage or custom.[31] The trade usage or custom exception is found in cases[32] where, through frequent and notorious use, a certain word or phrase takes on a different meaning to that which it has in ordinary language. In some instances white has taken on the meaning of black.[33] It is argued that in this class of case "evidence is admissible to show that white means black" so "why should not evidence of other circumstances which demonstrates the parties' shared understanding to the same effect be inadmissible?"[34]

In this type of case the incoherence of the subjective approach is clearly illustrated. This case is no real exception to any other case of interpretation. The important point to note is that trade usage or custom denotes the existence of an objective meaning. The parties would have understood the meaning subjectively but that would only be because the concept existed objectively. Therefore the trade usage or custom merely becomes part of the context that the court has to take into account when interpreting the terms of the contract. The measure is objective and not subjective and should therefore be taken into account when interpreting the contract.

The third fallacy relates to parol evidence. The parol evidence rule is an important part of contract law. This rule exemplifies the approach of the courts when engaged in interpreting contracts. The rule, however, only applies to cases where the parties have intended the whole of the contract

to be in writing.[35] If the contract is totally in writing and the parties have intended it to be so then the parties are not allowed to provide evidence that will "add, vary or contradict" the written document.[36] The rationale of the rule is that where parties use a written document evidencing their agreement then this document should be taken to be evidence of their agreement. The rule does not allow written words to be altered or qualified by the uncertain testimony of 'slippery memory'.[37]

A number of exceptions to the rule can be found[38] and the mere presence of these exceptions has resulted in a call to abolish the rule completely.[39] Professor McLauchlan does not make the expected call for the abolition of the parol evidence rule. He argues, rather, that the rule has no application to the present problem. Professor McLauchlan's argument is neatly encapsulated by the following quotation:[40]

Nothing in what is said above constitutes a breach of, or requires an exception to be made to, the parol evidence rule. This rule states that parol (extrinsic) evidence is not admissible to add, vary or contradict the terms of a written contract. However, it cannot be said that such evidence varies or contradicts the terms of a written contract until, through the process of interpretation, it has been determined what the words mean. A document may have been assented to as a complete record of the terms of an agreement, so that it is a written contract for the purposes of the application of the rule, but it must still be interpreted. Therefore, if parol evidence is merely admitted in aid of the interpretation, it does not vary or contradict the written terms but goes to determine what the terms are which cannot be varied or contradicted.

There are two inconsistencies inherent in this reasoning. The first is at a rather abstract level. The parol evidence rule was recognised during the classical era of the judicial development of the law of contract conceptualism.[41] One characteristic of this era is that words were thought to have a plain and ordinary meaning. It was held that by applying certain rules of interpretation, meaning could be derived from the words. Looking at the parties' subjective understanding is not part of this process of interpretation. It is in this conceptualism that the parol evidence rule finds its historic basis. The rule would lead to absurd results if these basic assumptions were not applied when implementing the rule. The error in Professor McLauchlan's argument lies in applying liberal notions of interpretation of contract to the parol evidence rule.

One notion that lies at the heart of the liberal approach to contract is the concept that words derive their meaning from the individual that might be either using the words or interpreting them.[42] The problem is that Professor McLauchlan attaches a liberal meaning to the word interpretation and uses it to explain away the parol evidence rule. Words derive their meaning from the people who interpret them under the liberal approach. The parol evidence rule applies to interpretation as understood in a classical sense. Under this approach words are deemed to have a settled or fixed meaning. Because of this the courts can be forced to ignore extrinsic evidence. The parol evidence rule and the liberal view of contract cannot co-exist. This becomes very apparent when the liberal approach is applied to a specific issue such as subsequent conduct.

There is a second error in the approach taken by Professor McLauchlan which must also be considered. In the article entitled "Subsequent Conduct as an Aid to Interpretation"[43] Professor McLauchlan argues that subsequent conduct should be allowed to form part of the interpretation of contractual terms. Allowing subsequent conduct as part of the interpretation process could lead to the nullification of the parol evidence rule. If subsequent conduct is allowed then parties can effectively refer to extrinsic evidence to vary the meaning of a written contract, thus effectively destroying the parol evidence rule. Even though subjective conduct can be referred to at present when relying on one of the exceptions to the rule, it should not be allowed to become the rule.

The most coherent statement of the parol evidence rule can be found in a 1986 release of the Law Commission in England[44] . Here it is held that:[45]

... although a proposition of law can be stated which can be described as the 'parol evidence rule' it is not a rule of law which, correctly applied, could lead to evidence being unjustly excluded. Rather, it is a proposition of law which is no more than a circular statement: when it is proved or submitted that the parties to a contract intended that all the express terms of their agreement should be in a particular document or documents, evidence will be inadmissible (because irrelevant) if it is tendered only for the purpose of adding to, varying, subtracting from or contradicting the express terms of that contract.

This approach assumes that parties intend to be bound by the plain and ordinary meanings of the words they employ. If they did not, then how would it ever be possible to establish the meaning of the contract? There is thus no place for the subjective understandings and subsequent conduct of the parties because the parties themselves have agreed that this shall not be looked at.

The final point to deal with is that made by Professor McLauchlan relating to formation of contract.[46] When the court considers whether a

contract has been formed it is permissible to take into account the subsequent conduct of the parties.[47] Professor McLauchlan argues that this is a reason for allowing subsequent conduct in the interpretation of the contractual terms. Why allow subsequent conduct when considering whether a contract exists and not when considering what the terms of that contract are? In order to rebut this argument it is important firstly to consider what the object of the court is when deciding whether a contract exists. What happens is quite different from interpreting the words of the parties.

The answer to the argument lies in the distinction between what is called the objective test of intention and the principle of objective interpretation.[48] The distinction between the two concepts is a very fine distinction but is crucial to the law of contract. Because the distinction is so fine one commentator has called the objective test of intention the global approach to contract formation.[49]

The global approach is here defined as follows:[50]

The global approach apparently differs in that the court is not concerned to discover the objective effect of individual communications between the parties but rather to ascertain whether the cumulative effect of these communications has led to a situation where an objective bystander would consider that the parties must each have considered that some contractual nexus had been established.

Therefore rather than trying to interpret what the parties had said the task is to interpret, on what the understanding was of what they had said, whether a contract was intended. The following quotation clearly demonstrates the difference between the two concepts:[51]

Clearly what 'objectivity' demands in the context of defining the meaning of the terms of the contract is very different from what it demands in relation to the existence of a contractual promise. In the latter context 'objectivity' requires the court simply to ensure that claims referring to contractual intention are firmly established by the evidence. In the former context, however, it requires that such claims be disregarded, whatever the available evidence.

Therefore, where the global approach aims to establish whether a contract exists, the objective principle seeks to establish what the terms of the contract are. As already established, subsequent conduct will always only show what the global approach seeks to establish; the objective approach is not concerned with it. Therefore it is only natural that the subsequent conduct should be taken into account when trying to establish whether a contract exists and not when deciding what that contract is.[52]

3. Mistake

The relevant question here is what impact does the method of interpretation have on the Contractual Mistakes Act 1977? The conceptual base of the Act has not been very certain and since its inception has caused many problems in the courts and academic discussion.[53] The exact application and scope of many of the sections in the Act remain the question of much speculation.54 The Act would seem to be an attempt to codify[55] the common law position to a certain extent. The Act essentially provides relief in cases where there has been no consensus ad idem due to some supervening cause. We firstly have to look at the implications of the Act expressly and then the impact of the underlying assumptions on the question of subsequent conduct. The impact of the courts' practice in cases of rectification has to be considered as this falls outside the scope of the Act.

It is important to look at the express authorisation of the objective approach to interpretation contained in the Act. Section 2(2) and section 6(2)(a) cumulatively exclude relief in cases where the mistake made relates to the interpretation of the contract. These sections are set out in the following terms in the Act:

S 2(2) For the purposes of this Act, and without limiting the meaning of the term 'mistake of law' but subject to section 6(2)(a) of this Act, a mistake in the interpretation of a document is a mistake of law.
S 6(2) For the purposes of an application for relief under s 7 of this Act in respect of any contract, - (a) a mistake in relation to that contract, does not include a mistake in its interpretation.

Although the exact purport of these two sections is not entirely clear the Court of Appeal has attempted to clarify the interpretation of these sections. In the case of Paulger v Butland Industries Ltd[56] the Court of Appeal held:

Conlon v Ozolins is a decision on its own particular facts. It is not authority for invoking the Act where one party misunderstood the clearly expressed intention of the other, or where one party meant something different from the plain meaning of his own words. For then the mistake is in the interpretation of the contract and the person making it cannot avail himself of the Act.

This is a clear affirmation of the objective approach to interpretation and this method is clearly required by the sections quoted above. This method is not concerned with the subjective intentions of the parties nor with the manifestation of their intention in their subsequent conduct.

The Act also excludes subsequent conduct implicitly. The whole question of mistake relates to one party having a subjective understanding as to the events different from what they really are.[57] The Contractual Mistakes Act 1977 allows the court to grant relief where certain types of mistake have occurred.[58] Before the court can say that a mistake has occurred it first has to establish what the correct interpretation of the contract is. If the court uses the parties' subjective understanding to come to a conclusion as to the true meaning of the contract then it will not be possible to establish whether a mistake has been made. This is so because the subjective understanding of the parties will be based on a mistake and will only lead the court astray in its quest for the true meaning of the contract. The court does not therefore look at the subsequent conduct of the parties because this will only show them what mistake has been made and not what the true meaning of the contract is.

This is also a reason against adopting a subjective approach to contract interpretation. If a subjective approach were adopted then it would make the Contractual Mistakes Act 1977 redundant. The Contractual Mistakes Act 1977 is only there to give relief in cases where, due to some subjective misunderstanding, a substantially inequitable result would ensue if the party was held to the contract. In such a case the contract the parties are bound to is one substantially different from the one they intended. When a subjective approach is taken then there will never be a situation where the subjective intent is different from that to which the parties are bound. This is so because the subjective intent of the parties becomes a determining factor in what the meaning of the contract is.

One remedy that is not affected by the Act by virtue of s 5(2) is the equitable remedy of rectification.[59] Professor McLauchlan argues that it is well-established practice for the court to have regard to the parties' subsequent conduct when concerned with an order for rectification.[60] The reason for taking into account the subsequent conduct of the parties has to do with the special aim that the court seeks to attain with an order for rectification.[61] The aim is to grant relief in a case where the contract does not represent the intentions of the parties. Professor McLauchlan asserts that if the court is allowed to look at the subsequent conduct in cases of rectification then it should be allowed to do so in all cases.[62]

With all due respect, to assert that rectification cases are the same as ordinary cases of contract interpretation is severely misunderstanding the remedy of rectification. In the case of rectification, equity allows a correction of the writing recording an alleged agreement because the parties have genuinely consented to all the terms of some contractual arrangement but the terms in which the agreement was recorded do not accurately represent the mutual intention of the parties.[63] Therefore the court is concerned with the actual subjectively held intention of the parties. Their subsequent conduct is a very helpful indicator of what their subjective intention was.[64] Rectification is an exception to the objective rule of interpretation.[65] The same considerations are therefore not relevant in the case of rectification as would be relevant in an ordinary case of contract interpretation. The court should therefore have regard to the subsequent conduct of the parties.

4. Statutory Interpretation

The aim of this part of the paper is to establish that the current approach to statutory interpretation[66] is the same as the approach taken by the courts in interpreting the words of a contract.[67] Even though the object of the court may be different when interpreting in these respective areas it would seem highly illogical to apply a different approach to interpretation. The first point to establish is what the current approach to statutory interpretation is. The second point to make is that this approach is essentially the same as the approach to the interpretation of contracts. The third point is that the application of the subjective approach to interpretation in the context of statutory interpretation reaches an incoherent result. The final point to make is that even though the current approach to interpretation is likely to change, it will rather change in the direction of objectivity than subjectivity. This is illustrated by an analysis of the Interpretation Bill.[68]

Currently s 5 (j) of the Acts Interpretation Act 1924 requires legislation to be given such fair, large, and liberal interpretation as will best ensure the attainment of the object of the legislation according to its true intent, meaning, and spirit. In Mangin v Commissioner of Inland Revenue[69] the court illustrated the important principles of interpretation. The court held that:

First, the words are to be given their ordinary meaning.... Secondly, one has to look merely to what has been clearly said. There is no room for intendment.... Thirdly, the object of a construction of a statute being to ascertain the will of the legislature it may be presumed that neither injustice nor absurdity was intended. If therefore a literal interpretation would produce such a result, and the language admits of the interpretation which would avoid it, then such an interpretation may be adopted....Fourthly, the history of an enactment and the reasons which led to its being passed may be used as an aid to its construction.

The similarities between the two approaches are striking. The first common principle is that both interpretation approaches assume that words have a plain and ordinary meaning. This implies an objective standard of interpretation. The second point of agreement between the two approaches is that of taking into account the genesis and aim of the thing interpreted.[70] In the case of statutes this may be the object and history of the legislation.[71] In the case of contracts the general facts known to both parties at the time of the contract may be part of the genesis or aim of the contract.[72] This is merely an application of the general principle of interpretation, which requires words to be interpreted by taking into account their context.

It would be impossible to apply a subjective approach to statutory interpretation. If the words were allowed to derive their meaning from the people who are interpreting them then a statute could have several different meanings when interpreted by several different people.[73] This will not only make the law uncertain but impossible to enforce.

It has to be noted that there have been recent calls for the revision of the Acts Interpretation Act 1924.[74] A new Interpretation Bill has been drafted and it is expected that the Bill will be enacted before the end of 1998. The general policy statement introducing the Interpretation Bill states that the aim of the Bill is to replace the Acts Interpretation Act 1924 with an updated interpretation statute expressed in modern language and applicable to modern conditions. The Bill proposes to replace s 5(j) of the Acts Interpretation Act 1924 with a new section 5. The proposed section 5 reads as follows:

1) The meaning of an enactment must be ascertained from its text and in the light of its purpose.
2) The matters that may be considered in ascertaining the meaning of an enactment include the indications provided in the enactment as printed or published under the authority of the New Zealand Government.
3) Examples of those indications are preambles, the analysis, headings to parts, sections, and groups of sections, diagrams, graphics, examples and explanatory material, and the organisation and format of the enactment.

Even though the section is replaced it would seem that this is not an attempt to change the current position toward interpretation. It is merely an attempt to state the approach to statutory interpretation in modern language. The comments that are therefore valid in the old context would also be applicable in the new context if the Bill was passed. The approach still favours an objective approach to interpretation. The new Bill will have statutes interpreted according to their text. In order for this to be possible there has to be a standard way of interpretation. The new Bill therefore confirms an objective approach to interpretation.

It has to be noted that there are striking similarities between the approach to contract interpretation and that of statutory interpretation. The most important similarity lies in the fact that both approaches assume that words have an ordinary and plain meaning. There is no reason why this should not be the case. The court tries to establish the meaning of words in their context when applying both methods of interpretation.

The second main reason for not allowing subsequent conduct as part of the interpretation process is that it would undermine certainty of contract. Certainty in this context can refer to two different but related concepts. The first meaning of certainty relates to the certainty in meaning of the terms.[75] It has often been described as the duty of the courts to give effect to the parties' intention. The court can not do this if it is not certain as to the meaning of the parties. There have been cases where the court has declared a contract void because of uncertainty but the court is extremely reluctant to find in such a way.[76] The second sense in which certainty can be employed is the sense in which it means that one party is entitled to expect that, if there is a contract, then it will be binding on the other party and the law will give effect to this agreement. What impact can subsequent conduct have on certainty of contract? The answer lies in a deeper understanding of the two meanings of the term.

The first meaning ascribed to certainty has been considered by the court in the case of A-G v Baker Bros Ltd.[77] Here Richmond P held that there are basically three principles that the court should adhere to when trying to interpret the contract:[78]

(1) If it appears that the true intention of the parties was not to enter into a binding arrangement until and unless certain unsettled terms of their bargain were settled by agreement between them, then no contract can come into existence in the absence of such further agreement...(2) If.. the court is satisfied that the real intention of the parties was to enter into an immediate and binding agreement then the court will do its best to give effect to that intention...(3) Apparent lack of certainty will be cured if some means or standard can be found whereby that which has been left uncertain can be rendered certain.

It is contended that in this context the subsequent conduct should be taken into account. This may seem anomalous in the light of above argument but it is not. In this type of case the court is concerned with the question of contract formation. As argued above[79] the distinction is a very fine one but is still a valid one. Certainty in this context thus forms part of the objective test of contract formation. The courts have to be certain that there has been an agreement before they can enforce that agreement. This is the context that the first meaning of certainty should therefore be understood in.

The second sense in which certainty can have a bearing is the wider sense as defined above. This sense is the more important sense and it has also been described as the 'commercial certainty' of a term.[80] Although this term is referred to as one of the most important policy considerations in contract law a concise definition of it is hard to find. This type of certainty is often cited as fundamental to the classical theory of contract. Classical theory of contract seemed to dominate the law in the early part of the century and its greatest proponents are authors such as Oliver Wendell Holmes Jr. and Professor Williston. The main precepts of this approach have been defined as:[81]

Contract liability should be restricted very narrowly
Liability, though narrowly restricted, should be virtually absolute
Contract remedies should be as ineffective as possible.

Halfway through the century the tide began to swing drastically against this classical theory of contract and a new theory started to develop. Its proponents were mainly Cardozo J and Corbin.[82] This approach seemed to say that courts must pay closer attention to reasonable parties' just intentions rather that to try and set abstract principles. It was argued by many that classical contract theory had died a silent death.[83] The competing interests of these approaches have caused many conceptual problems in the context of contract. It would seem however that the common law world has never been too extreme in its approval of the new approach. Recently it has been argued that:[84]

The past dozen or so years, however, courts have substantially resurrected the conceptualist verities of classical era contract interpretation. The parol evidence rule has regained much of its former favor, and courts today are far more likely than they were two decades ago to interpret language as a "matter of law" according to its "plain meaning". "Certainty" and "predictability" have again become the principal watchwords and sellers, employers, and banks have again become the principal beneficiaries.

It is clear that Professor McLauchlan holds to the new conceptual approach to contract rather that the classical theory. Certainty is therefore not such an important consideration in his thinking. It is rather more important to get a fair result in each case and allow the law to be flexible. It is now

becoming apparent that this modern approach to contract leads to absurdity in the law and the abandonment of the approach in the United States of America is clear evidence of this. The problem with the new conceptual view of contract is that it ignores the reasons behind contract. It ignores what Professor Lawson so aptly captures in the following quotation: [85]

There are parts of the law that are essentially prospective in the sense that they exist for the purpose of telling people how to act and how not to act, and for the further purpose of assuring them in the most certain manner possible what will be the effect of particular lines of conduct. There are, on the other hand, parts of the law which are essentially retrospective in the sense that they exist for the purpose of cleaning up messes... What has happened in these cases is that something has gone wrong and that the court is faced with the problem of how to readjust the relations between parties involved.

The point that the modern theorists on contract law omit to give enough weight to is that in contract law the parties have chosen to be bound by a certain type of legal framework. This is known as certainty of contract. This concept of certainty is the cornerstone of contemporary business relations. A great component in the cost estimation of businesses is the risk they may face in a certain contingency. The greater the risk component the greater the cost and the more averse the parties will be to the contingency. Contract loses its reason and its utility when subjective and irrelevant factors are taken into account because this creates uncertainty. This therefore leads us to the conclusion that subsequent conduct should be given no place in contract interpretation. For it to have a place would ignore the deeper policy considerations inherent in contract law. It would undermine a fundamental precept of business relations.

IV. Reform

Reform is really a misnomer for this section. What we really want to do is propose a set of rules that will make it easier for the courts to interpret contractual language. This may not entail writing a new set of rules but rather confirming those that already exist and clarifying some difficult questions. The difficult question this paper tries to clarify is the question about subsequent conduct. Should it be allowed to play a role in the current contract interpretation process? The answer must be an emphatic "no". How should this result be attained? One suggestion is made here; there may be other possibilities.

The suggestion of this paper is that the legislature should be given the task of rectifying the law. The courts have been contemplating the position since the 1970s. No conclusive answer has been proposed, with conflicting positions in the High Court. This also contributes to uncertainty. The matter has been left open on too many occasions.[86] An easy way to rectify the matter is merely to insert a section in the Contractual Mistakes Act 1977. This section can make clear the differences between the global approach to contract formation and the objective approach to contract interpretation. The section could set out the principles of interpretation currently followed by the court and also add that subsequent conduct should not be taken into account when interpreting the contract. This would resolve the issue while allowing the court some leeway in applying the principles.

V. CONCLUSION

The question contemplated at the outset of the paper was whether subsequent conduct should be allowed to play a role in the interpretation of contracts. This question looks deceptively easy and does not alert one to the conceptual difficulties underlying the question. if subsequent conduct is allowed in the interpretation of contracts then this will be a victory for the modern theorists of contract law. It will however be a loss to the business community at large. Not only will a sense of uncertainty be added to the law of contract but also a growing sense of conflict between the classical and modern schools of thought will result. The lack of consistency in the application of a coherent system of rules will spell confusion in the law of contract interpretation that will have a ripple effect into other areas of contract law. The question of interpretation lies at the heart of contract law and its sound conceptual base should be vigorously promoted and jealously guarded. The cost of confusion is incalculable in this context. The inevitable conclusion is therefore that subsequent conduct should have no place in the interpretation of contracts.


[*] This paper was awarded the Canterbury Law Review Prize for the best undergraduate Honours Paper completed in 1999. It was submitted in 1998 and is published in its original form. The Interpretation Bill has since been enacted: Interpretation Act 1999.

[1] Masport Ltd v Morrison Industries Ltd (unreported, Cooke P, Richardson and Robertson JJ, 31 August 1993, CA, 362/92); Benjamin Developments Ltd v Robt Jones (Pacific) Ltd [1994] 3 NZLR 189; Australian Mutual Provident Soc v National Mutual Life Assn of Auckland Ltd [1995] 1 NZLR 581; Board of Trustees of the National Provident Fund v Shortland Securities Ltd [1996] 1 NZLR 45; Charrington & Co Ltd v Woodar [1914] AC 71; Codelfa Construction Pty Ltd v State Rail Authority of New South Wales(1982)149 CLR 337; BNZ v Simpson [1900] AC 182; A-G v Shore [1843] EngR 679; 59 ER 1002 at 1021.

[2] D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ 80 and "Subsequent Conduct as an Aid to Interpretation" (1996) 2 NZBLQ 237. See also D W McLauchlan, "Common Assumptions and Contract Interpretation" (1997) 113 LQR 237 at 239. For a good discussion on patent and latent ambiguity see Stephen Charles, "Interpretation of Ambiguous Contracts by Reference to Subsequent Conduct" (1991) 4 JCL 16. on an analysis of the conceptual base of contract interpretation see M Kniffon, "A New Trend in Contract Interpretation: The Search for Reality as Opposed to Virtual Reality" (1995) 74 Oregan LR 645.

[3] Herriot v Crofton Holdings Ltd [1974] 2 NZLR 383 at 388; Everard Films Distributors Ltd v SBSA(NZ) Ltd (unreported, Blanchard J,17/5/94, HC Auckland, CP7/94); McLaren v Waikato Regional Council [1993] 1 NZLR 710; NZ Post Ltd v ASB Bank Ltd [1995] 2 NZLR 508; Druex Holdings Ltd v A-G (1996) 7 TCLR 82; (1997) 7 TCLR 616.

[4] Conlon v Ozolins [1984] NZCA 23; [1984] 1 NZLR 489; Paulger v Butland Industries Ltd [1989] NZCA 190; [1989] 3 NZLR 549 and discussion of the cases in Burrows, Finn and Todd, The Law of Contract in New

Zealand (Wellington: Butterworths, 1997), p 279.

[5] Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 at 567; Mechenex Pacific Services Ltd v TCA Air-conditioning (New Zealand) Ltd [1991] 2 NZLR 393 at 396-7; Druex Holdings Ltd v A-G (1996) 7 TCLR 82; (1997) 7 TCLR 616; McLaren v Waikato Regional Council [1993] 1 NZLR 710. For the approach in England and Wales and in Scotland, see House of Lords cases: James Miller & Ptners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 and L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235, [1973] 2 All ER 39, This approach was endorsed by the Judicial Committee of the Privy Council in the cases of Ashton v Commissioner of Inland Revenue [1975] 2 NZLR 171 (PC); AMP Soc v Allan [1978] UKPC 7; (1978) 52 ALJR 407 at 411; Narich Pty Ltd v Commissioner of Payroll Tax (1983) ALJR 30 at 32. Cases that do not agree with the approach outlined are Watchman v A-G of East Africa Protectorate [1919] AC 533 and New Zealand Diving Equipment Ltd v Canterbury Pipelines Ltd [1967] NZLR 961.

[6] Burrows, Finn and Todd, The Law of Contract in New Zealand (Wellington: Butterworths, 1997), p 279, G H Treitel, An Outline of the Law of Contract ( London: Sweet & Maxwell, 9th ed, 1995) p 72, A de Moor, "Intention in the Law of Contract: Illusive or Illusory" (1990) 106 LQR 632 at 646-48.

[7] Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 at 567; Mechenex Pacific Services Ltd v TCA Air-conditioning (New Zealand) Ltd [1991] 2 NZLR 393 at 396-7;

Druex Holdings Ltd v A-G (1996) 7 TCLR 82; (1997) 7 TCLR 616; McLaren v Waikato Regional Council [1993] 1 NZLR 710.

[8] James Miller & Ptners Ltd v Whitworth Street Estates ( Manchester ) Ltd [1970] AC 583 and L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235, [1973] 2 All ER 39.

[9] [1971] 1 WLR 1381.

[10] Ibid at 1348.

[11] Ibid at 1385.

[12] [1993] 1 NZLR 710 at 725.

[13] Ibid.

[14] Norton on Deeds (2nd ed, 1928), p50 as cited in D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ 80.

[15] G H Treitel, An Outline of the Law of Contract ( London: Sweet & Maxwell, 9th ed, 1995) p 72. Certainty is here advocated as being the major reason for the plain meaning rule.

[16] Michael S Moor, "Interpreting Interpretation' in A Marmor, Law and Interpretation: Essays in Legal Philosophy (Oxford: Clarendon Press, 1995). The method of using words as symbols of expression is named the 'communicative model of interpretation'.

[17] Owen M Fiss, "Objectivity and Interpretation" (1982) 34 Stan L Rev 739 at 744.

[18] A Marmor Interpretation and Legal Theory (Oxford: Clarendon Press, 1992), p13. Interpretation is here defined as the imposition of meaning on an object.

[19] Chitty on Contracts (London: Sweet & Maxwell: 27th ed, 1994), p 602. The same point is here made in the context of the parol evidence rule.

[20] McLaren v Waikato Regional Council [1993] 1 NZLR 710; James Miller & Ptners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583; L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235, [1973] 2 All ER 39. These cases employ the same reasoning and come to the same answer.

[21] D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ [80].

[22] For more complete arguments in favour of this statement see Corbin on Contracts (St Paul: West Publishing Co, 1960) Vol 3, para 558 n 4, pp 257-58. See also pp 36- 40 (Vol 3, 1998 Supplement).

[23] J P Vorster, "A Comment on the Meaning of Objectivity in Contract" (1987) 103 LQR 274. Here the author argues that it is better to take into account the parties' subjective intention if it is proved rather than ignore it. It is also argued that where the subjective intention is proved, this is prima facie evidence of the ordinary meaning. See also J R Spencer, "Signature, Consent and the Rule in L'Estrange v Graucob [1934] 2 K.B 394" [1973] 32 CLJ 104. Here it is argued that one should not ask how a reasonable person would have interpreted the terms but rather how the person they were communicated to would have interpreted them. R A Samek in "The Objective Theory of Contract and the Rule in L'Estrange v Graucob" (1974) 52 Can Bar Rev 351 argues that the concept of performative utterances should form the conceptual base of contract interpretation.

[24] William Howarth, "The Meaning of Objectivity in Contract" (1984) 100 LQR 265. Here it is taken for granted that the subjective approach to interpretation is not a feasible option.

[25] D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ 80.

[26] Towne v Eisner [1918] USSC 7; (1918) 245 US 418 at 425, as cited in D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ 80.

[27] Corbin on Contract (St Paul: West Publishing Co, 1960, Supplement 1998), pp 36-40. Here it is clearly explained why the objective approach should not be followed.

[28] Ibid. This is basically a reformulation of the test set out in Corbin on Contract.

[29] A Marmor, Interpretation and Legal Theory (Oxford: Clarendon Press, 1992), p 13. Interpretation is here defined as the imposition of meaning on an object.

[30] Towne v Eisner [1918] USSC 7; (1918) 245 US 418 at 425, as cited in D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ 80.

[31] D W McLauchlan, "Subsequent Conduct as and Aid to Interpretation" (1996) 2 NZBLQ 247 at 249.

[32] Smith v Wilson [1832] EngR 643; (1832) 3 B & Ad 728; 110 ER 266.

[33] Mitchell v Henry (1880) 15 Ch D 181.

[34] D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ 80 at 88.

[35] Burrows, Finn and Todd, Law of Contract in New Zealand (Wellington: Butterworths, 1997), p161; Cheshire and Fifoot's Law of Contract (Australia: Butterworths, 7th ed, 1997), p 326; Chitty on Contracts ( London: Sweet & Maxwell, 27th ed, 1994), Vol 1, p 602.

[36] Jacobs v Botavia & General Plantations Trust [1924] 1 Ch 287 at 295. See also Mathieson Cross on Evidence (Wellington: Butterworths, 5th ed, 1996) Ch 20; D W McLauchlan, "The Admissibility of Parol Evidence to Interpret Written Contracts" (1974) 6 NZULR [121].

[37] Bacchus Marsh Concentrated Milk Co Ltd v Joseph Nathan & Co Ltd [1919] HCA 18; (1919) 26 CLR 410 at 451-452, as quoted in Cheshire and Fifoot's Law of Contract ( Australia: Butterworths,7th ed, 1997), p 326.

[38] Burrows, Finn and Todd, Law of Contract in New Zealand (Wellington: Butterworths, 1997), p 164.

[39] D W McLauchlan, "The Admissibility of Parol Evidence to Interpret Written Contracts"(1974) 6 NZULR 121.

[40] D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ[80]at 87.

[41] R J Mooney, "An American View of New Zealand Contract Law" (1991) 21 VUWLR 69 at 71; R J Mooney, "The New Conceptualism in Contract Law" (1995) 74 Oregon LR 1131 at 1149. See n 76 below for more comprehensive explanation. See also the following cases: Evans v Roe (1872) C R 7 C P 138; Mercantile Agency Co Ltd v Flitwick Chalybeate Co(1897) 14 TLR 90.

[42] D W McLauchlan, "The Plain Meaning Rule of Contract Interpretation" (1996) 2 NZBLQ 80; R J Mooney, "The New Conceptualism in Contract Law" (1995) 74 Oregon LR 1131 at 1149. See n 76 below for more comprehensive explanation.

[43] D W McLauchlan, "Subsequent Conduct as an Aid to Interpretation" (1996) 2 NZBLQ[247].

[44] Law Commission, England Law of Contract The Parol Evidence Rule (Report No 154,[1986] ), para 2.7

[45] This statement is endorsed by Chitty on Contracts (London: Sweet & Maxwell, 27th ed, 1994), Vol 1, p 602. The following cases are cited as endorsing the approach: State Rail Authority of New South Wales v Heath Outdoor Pty Ltd (1986) 7 NSWLR 170 at 192; Yani Haryanto v ED & F Man (Sugar) Ltd [1986] 2 Lloyd's Rep 44 at 46; Youel v Blond Welch & Co Ltd [1992] 2 Lloyd's Rep 127 at 140.

[46] D W McLauchlan, "Subsequent Conduct as and Aid to Interpretation" (1996) 2 NZBLQ [247] at 255.

[47] National Bank of New Zealand v Murland [1991] 3 NZLR 86 at 93.

[48] Burrows, Finn and Todd, Law of Contract in New Zealand (Wellington: Butterworths, 1997), p 36.

[49] Ibid.

[50] Ibid.

[51] A de Moor, "Intention in the Law of Contract: Illusive or Illusory"(1990) 106 LQR 632.

[52] The following articles are also relevant in the question of contract formation because they seek to deal with the same conceptual problem, that is, understanding the intentions of the parties. J P Vorster, "A Comment on the Meaning of Objectivity in Contract" (1987) 103 LQR 274. Here the author argues that it is better to take into account the parties' subjective intention if it is proved rather than ignore it. It is also argued that where the subjective intention is proved, this is prima facie evidence of the ordinary meaning. See also J R Spencer, "Signature, Consent and the Rule in L'Estrange v Graucob [1934] 2 KB 394" [1973] 32 CLJ 104. Here it is argued that one should not ask how a reasonable person would have interpreted the terms but rather how the person they were communicated to would have interpreted them. R A Samek "The Objective Theory of Contract and the Rule in L'Estrange v Graucob" (1974) 52 Can Bar Rev 351 argues that the concept of performative utterances should form the conceptual base of contract interpretation.

[53] D W McLauchlan, "Mistake of Identity After the Contractual Mistakes Act 1977"(1978) 10 NZULR 199; "Mistake as to Contractual Terms under the Contractual Mistakes Act" (1980) 12 NZULR 123; "The Demise of Conlon v Ozolins: 'Mistake in Interpretation' or Another Case of Mistaken Interpretation?" (1984) 14 NZULR 299; Chen Wishart, M, "The Contractual Mistakes Act 1977 and Contract Formation"(1985) [1986] OtaLawRw 9; 6 Otago LR 334; B Coote, "The Contract and Commercial Law Reform Committee and the Contract Statutes" (1981) 13 NZULR 160; Dawson, "The New Zealand Contract Statutes" [1985] LMCLQ 42; McLauchlan and Rickett "Mistake and Ignorance under the New Zealand Contractual Mistakes Act 1977" (1994) 8 JCL 193 ; as cited in Burrows, Finn and Todd, Law of Contract in New Zealand (Wellington: Butterworths, 1997), Ch 9; Conlon v Ozolins [1984] NZCA 23; [1984] 1 NZLR 489.

[54] As an example take s 6(1)(a)(i). Contrast McKee v McMorran [1992] 5 TCLR 221 and Weddel New Zealand Ltd v Taylor Preston Ltd [1993] 2 NZLR 104 at109 with Denning v Tri Star Customs and Forwarding Ltd (1996) TCLR 256. For relevant articles with different views taken on the issue of 'knowledge' as a requirement in the section see D F Dugdale, "Constructive Notice of a Unilateral Mistake" (1996) 2 NZBLQ 20; B Coote, "Variation Under the Contracts Statutes" [1997] 3 NZBLQ 3; D W McLauchlan, "Analysing Mistake" [1997] 3 NZBLQ 194; B Coote, "Analysing Mistake - A Response" [1997] 3 NZBLQ 201. The matter seems to have been resolved by the Court of Appeal in Tri Star Customs Forwarding Ltd v Denning (unreported, Richardson P, Henry, Thomas, Keith and Tipping JJ, 2/7/1998,CA, 170/97).

[55] Contractual Mistakes Act 1977 s 5.

[56] [1989] NZCA 190; [1989] 3 NZLR 549.

[57] Burrows, Finn and Todd, Law of Contract in New Zealand (Wellington: Butterworths, 1997), p 270.

[58] Contractual Mistakes Act 1977 s 6 (1). In Burrows, Finn and Todd, Law of Contract in New Zealand ( Wellington: Butterworths, 1997), p 279, a tripartite test is identified: (a) a mistake coming within s 6(1)(a), (b) an inequality of consideration in the mistake, (c) that the applicant for relief was not obliged by the contract to bear the burden of any risk as to mistake.

[59] Burrows, Finn and Todd, Law of Contract in New Zealand (Wellington: Butterworths, 1997), pp 293-97.

[60] Westland Savings Bank Ltd. v Hancock [1987] 2 NZLR 21; M'Cormack v M'Cormack (1877) 1 LR Ir 119; Dormer v Sherman (1966)110 Sol Jo 171.

[61] Dundee Farm Ltd v Bambury Holdings Ltd [1976] 2 NZLR 747, aff'd [1978] 1 NZLR 647.

[62] D W McLauchlan, "Subsequent Conduct as an Aid to Interpretation" (1996) NZBLQ 237 at 258.

[63] Burrows, Finn and Todd, Law of Contract in New Zealand (Wellington: Butterworths, 1997), p 294; Dundee Farm Ltd v Bambury Holdings Ltd [1976] 2 NZLR 747, aff'd [1978] 1 NZLR 647.

[64] Westland Savings Bank Ltd v Hancock [1987] 2 NZLR 21; M'Cormack v M'Cormack (1877) 1 LR Ir 119; Dormer v Sherman (1966) 110 Sol Jo 171.

[65] Story, Commentaries on Equity Jurisprudence, as Administered in England and America (Littleton Colo: F B Rothman, 13th ed, 1988).

[66] Commissioner of Inland Revenue v Alcan New Zealand Ltd [1994] 3 NZLR 439 (CA); Mangin v Commissioner of Inland Revenue [1971] NZLR 591; Heydon's case (1584) 3 Co Rep 79; Challenge Corp Ltd v Commissioner of Inland Revenue [1986] 2 NZLR 513.

[67] Boulder Consolidated Ltd v Tangaere [1980] 1 NZLR 560 at 567; Mechenex Pacific Services Ltd v TCA Air-conditioning (New Zealand) Ltd [1991] 2 NZLR 393 at 396-7; Druex Holdings Ltd v A-G (1996) 7 TCLR 82; (1997) 7 TCLR 616; McLaren v Waikato Regional Council [1993] 1 NZLR 710. For the approach in England and Wales and in Scotland, see House of Lords cases: James Miller & Ptners Ltd v Whitworth Street Estates (Manchester) Ltd [1970] AC 583 and L Schuler AG v Wickman Machine Tool Sales Ltd [1973] UKHL 2; [1974] AC 235, [1973] 2 All ER 39, This approach was endorsed by the Judicial Committee of the Privy Council in the cases of Ashton v Commissioner of Inland Revenue [1975] 2 NZLR 717 and AMP Soc v Allan [1978] UKPC 7; (1978) 52 ALJR 407 at 411 and also Narich Pty Ltd v Commissioner of Payroll Tax (1983) ALJR 30 at 32. Cases that do not agree with the approach outlined are Watchman v A-G of East Africa Protectorate [1919] AC 533 and New Zealand Diving Equipment Ltd v Canterbury Pipelines Ltd [1967] NZLR 961.

[68] Currently there is an Interpretation Bill progressing through the House that embodies the suggestions for change outlined by the Law Commission in its report A New Interpretation Act: To Avoid Prolixity and Tautology (Report No 17, 1990). It is expected that this Bill will become law before the end of 1998.

[69] [1971] NZLR 591.

[70] Andrei Marmor, Interpretation and Legal Theory (Oxford: Clarendon Press, 1992), p156; Bennion, Bennion on Statute Law (London: Longman Group UK Ltd, 3rd ed, 1990), p 104.

[71] Ibid at 107.

[72] McLaren v Waikato Regional Council [1993] 1 NZLR 710.

[73] Michael S Moore "Interpreting Interpretation" in A Marmor Law and Interpretation: Essays in Legal Philosophy (Oxford: Clarendon Press, 1995), p 8. The author uses the concept of Rorschach clouds to explain the subjective theory of interpretation.

[74] NZ Law Commission A New Interpretation Act: To Avoid Prolixity and Tautology ( Report

No 17, 1990).

[75] Burrows, Finn and Todd, Law of Contract in New Zealand (Wellington: Butterworths, 1997), p 78; G H Treitel, The Law of Contract (London: Sweet & Maxwell, 9th ed, 1995), p 56. See also Fridman, "Construing, Without Constructing a Contract" (1960) 76 LQR 521 at 524; M Howard, "Contracts - Sale of Goods - Contracts of Certainty" (1973) 51 Can Bar Rev 668; R A Samek, "The Requirement of Certainty of Terms in the Formation of Contract; A Quantitative Approach" (1970) 48 Can Bar Rev 203.

[76] Willetts v Ryan [1968] NZLR 863; Courtney v Fairbairn Ltd v Tolaini Bros (Hotels) Ltd [1975] 1 All ER 453.

[77] [1976] 2 NZLR 465 at 498-99.

[78] Ibid. Richmond P made these remarks in the context of agreements to agree.

[79] A de Moor, "Intention in the Law of Contract: Illusive or Illusory" (1990) 106 LQR 632.

[80] G H Treitel The Law of Contract ( London: Sweet & Maxwell, 9th ed, 1995) p 713.

[81] R J Mooney, " An American View of New Zealand Contract Law" (1991) 21 VUWLR 69 at 71.

[82] G Gilmore The Death of Contract (Ohio; State University Press,1974).

[83] G Gilmore The Death of Contract (Ohio; State University Press, 1974); P Atiyah The Rise and Fall of Freedom of Contract ( Oxford: Oxford Uni Press, 1979); B Mensch, "Freedom

of Contract as Ideology" (1981) 33 Stan LR 754.

[84] R J Mooney, "The New Conceptualism in Contract Law" (1995) 74 Oregon LR 1131 at 1149. For other proponents of this view see E A Farnsworth, "Developments in Contract Law During the 1980s: The Top Ten" (1990) 41 Case W Res L Rev 203; K L Macintosh, "Gilmore Spoke Too Soon: Contract Rises from the Ashes of the Bad Faith Tort" (1994) 27 Loy L A L Rev 483 at 485; M J Horwitz, "Foreword: The Constitution of Change: Legal Fundamentalism without Fundamentalism" (1993) 107 Harv L Rev 32 at 98.

[85] Lawson The Rational Strength of English Law ( London: Stevens, 1951), pp 68-9 as cited in G Brennan, "Opening Address" (1990) 3 JCL 85 at 86.

[86] Druex Holdings Ltd v A-G (1996) 7 TCLR 82; (1997) 7 TCLR 616.


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