CL-2024-000186 - [2025] EWHC 1895 (Comm)

The contract must be interpreted objectively by asking what a reasonable person, with all the background knowledge which would reasonably have been available to the parties when they entered into the contract, would have understood the language of the contract to mean.

The court must consider the contract as a whole and, depending on the nature, formality and quality of its drafting, give more or less weight to elements of the wider context in reaching its view as to its objective meaning.

Interpretation is a unitary exercise which involves an iterative process by which each suggested interpretation is checked against the provisions of the contract and its implications and consequences are investigated.

The court focuses on the objective meaning of the relevant words in their documentary, factual and commercial context.

The objective meaning has to be assessed in light of: (a) the natural and ordinary meaning of the clause; (b) any other relevant provisions of the agreement; (c) the overall purpose of the clause and the agreement; (d) the facts and circumstances known or assumed by the parties at the time that the document was executed; and (e) commercial common sense, but (f) disregarding subjective evidence of any party’s intentions (including evidence of their pre-contractual negotiations).

If there is more than one possible construction of a term, the court is entitled to prefer the construction that is more consistent with business common sense and reject the other.