LAWS104 Chapter Notes - Chapter 12: Parol Evidence Rule, Rebuttable Presumption, Persimmon Plc
11 May 2018
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Construction of Contractual Terms
The Importance of Intention
- In ascertaining the meaning of the terms of a contract, the court is primarily
concerned with objectively determining the intention of the parties
o Reaffirmed in Ecosse Property Holdings Pty Ltd v Gee Dee Nominees Pty Ltd
by Kiefel, Bell, and Gordon JJ
- The basis approach in determining the intention of the parties was set out in
Chartbrook Ltd v Persimmon Homes Ltd
- In relation to the same word used more than once in carefully drafted document, a
rebuttable presumption arises to the effect that the intention was for the word to mean
the same thing throughout the entire document. However, it may be that the same
words have different meanings, even if in the same document
- When constructing terms of a contract, a court must have regard to all its words used
to ensure the congruent operation of its various components as a whole
- In construing contractual terms a court will seek to adopt a construction that will
preserve the validity of the contract and in that regard will strive to avoid holding
agreement, in particular commercial agreements, void for uncertainty
- Where technical words and phrases are incorporated into a contract, there is a
rebuttable presumption that they are used with that technical meaning in mind – not
easily rebutted
- The impact of the contract upon third parties is relevant to determining the objective
intention of the parties
Principles of Construction
- Presumption that unreasonable results are not intended
- Avoidance of inconsistencies
- Presumption in favour of business common sense
The Use of Dictionaries
- Issues
o A dictionary will often provide various shades of meanings to a word
o Dictionaries published in different countries may give different meanings to words
o Reference to dictionaries is no substitute for judicial determination of the meaning the
parties have given a word or phrase
- The primary task of a court is to find, not the dictionary meaning, but the meaning as used by
the parties in the context of their particular transaction
The Parol Evidence Rule and the Construction of Contracts
- The parol evidence rule contains two parts
o The first is concerned with the exclusion of extrinsic evidence that would add
to, subtract from, or vary or qualify the terms of a written contract
o Our concern here is with the second party, that deals with the exclusion of
extrinsic evidence that would otherwise assist the court in construing the
contract
- Prior negotiations
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