How court would read your contract?

This article was written by academic unit members of Moot Club USIM. Have fun reading!

Article Summary

Title: “How court would read your contract”

Writer: Voon Su Huei

Published :31. October.2020

Prepared by: Nurul Hilaliyyah Binti Madoseh@Abdullah

Sources: https://www.thomasphilip.com.my/articles/how-the-court-would-read-your-contract/

This article discusses the way contract is read in court by the way of judges. Generally, a contract is made between two parties when they come to a consensus negotiation. However, discord may happen between the two parties and the court has to resolve the disputes. Some might say that the court should simply decide what seems fair and equitable based on the contract to the parties involved but is that all? Sometimes what seems fair to everyone may not be fair to someone and the court has been given the privilege to decide which one is fair and equitable to all parties involved. This article focuses on the broad guidelines that the court may follow to decipher the written agreement.

Firstly, the court will need to distinguish a contract predetermined by parties to be legally binding. As numerous drafts have been reciprocated between parties before they reach consensus. Subsequently, the contract must remain simple and unassuming in the eyes of the judge. Signify that, everything that has been written in the contract will only be read distinctly and unambiguously without considering the parties' thoughts. If there are two interpretations in the contract, the court ought to choose elucidation that makes more commercial sense in the incident. In the case SPM Membrane Switch Sdn. Bhd. v Kerajaan Negeri [2016] 1 MLJ 464 where the dissension focus on clause 8.1 and clause 9 that stated in the contract. The court need to choose between two interpretation whether clause 8.1 could be practiced unaccompanied by clause 9 or it must be exercised with clause 9. The court decided that clause 8.1 must be accompanied by clause 9 as it is more commercial sense in the situation. Consequently, the judge may also apply holistic and main modus operandi to read the contract. In contrast, there is a main and supplement agreement, the court is inclined to reconcile all parts of the agreement to attain a balanced interpretation. However, if it is futile the court is more likely to use the main modus operandi which will first examine the main purpose of the contract and eliminated any or whole provision which is contrary to the main purpose of the contract. Following, the court may resort to the contra proferentum rule which implies interpretation against the draftsman. As an illustration, in the contract, it is stated that party A would receive goods which were provided by company B. However, it did not make clear the sources of the goods, therefore the court would implement contra proferentum rule in this context. Next, the court might consider any factual matrix outside the four corners of the contract. This means the court was allowed to take into consideration the meaning being conveyed by the contract to a reasonable person who has the background knowledge of the contract. Last but not least, the individual perspective of parties is inconsequential when interpreting the meaning of a contract. It is not legitimate to impute the meaning of a contract solely on the subjective intention of parties.

From my ground of standing, there are three ways that I concede with on how the court read the contract which is using the holistic and main approach, recourse to contra proferentum rule, and considering beyond the four corners. Firstly, the holistic and main approach can be heeded as a ‘strict’ method as the judge will only look at the contract as a whole and will view it from the main approach. This can make parties involve feel reassured as the possibility of the judge being biased to other parties involved is minimal as the judge will only consider what he sees as unexpurgated and objective purpose in the contract. The fact that the judge will eliminate other supplement agreements that in opposition to the main agreement shows us that, the court fair and equity to everyone no matter who is it. Furthermore, resort to contra proferentum rule sometimes might help the parties of the contract that suffer loss get their justice. Sometimes in this society, there are numerous individuals that live their lives in regret as they are signing the contract that they thought will give benefit to them but instead give misery to their lives. Such an employment contract or contract regarding the artist who wants to join certain entertainment company, usually are the one who most taken advantage of as they are desperate to get better life without, they realize that, the agreement is a handicap to them. If the judge utilizes this rule to perceive the intention of the draftsman when creating the contract perhaps mankind might get a satisfactory life. Moreover, assessing beyond the four corners while reading the contract is quite favorable for the judge to have a better grasp of understanding the situation that is being tried and able to make a verdict without being prejudice to any parties. All of these three ways might be the most effective aid to the judge in assimilating the contract fully from my point of view.

My perspective of court way to stick to the plain contract and do not take into consideration of subjective view of parties when reading the contract is not quite favorable. I presume that it will make the parties who suffer harm either those who breach the contract or who his contract is breached by other parties, receive no justice and fairness. Sometimes, read-only what is written in the contract may not give the court a full perception of the circumstances that happen between the parties. A personal view of parties might be biased to their selves and make the court more complicated than it's supposed to however it still didn’t eliminate the possibility of aiding the judge to reach a legitimate decision. The court needs to have a bigger vision when deciding one case as it is associated with one's life. The sentenced receive from the court holds an enormous impact on the parties involved. Therefore, if the court put into consideration to include the subjective perspective of the parties while deciding the cases maybe it will assist the court to execute a better verdict.

In conclusion, the court usually envisions the most preferable judgment to all parties involved when giving a verdict. However, the court can’t escape from receiving critics from civilians as some might have a different viewpoint from the court. It does not change the fact that the court and the community, both want to attain a better world especially in civil matters such as contract law. I believe with the ways the court read the contract, the risk of misjudgment in the contract-related case can be lessen resulting in citizens trust the law will protect them and the law will also punish those who are guilty.