Textualism and Contextualism as Non-Conflicting Paradigms Report (Assessment)

Introduction

In present-day realities, textualism and contextualism are viewed as two opposing principles of legal procedure. Textualism is understood as full compliance with the word of a legal document placed before a court of law.¹ Contextualism, on the other hand, is the approach that places the highest value on the interpretation of a text for the purpose of finding its objective meaning viewing it in the circumstances in which it was created and signed.² Before the 1970s, English law viewed contract cases using the rigid understanding of the text and emphasized the formal or literal meaning of what was said or written.³ After the establishment of the Unfair Contract Terms Act of 1977, courts were assigned with a new mechanism that allowed them to refer to reasonableness, which formalized the procedure for interpretation of the contract terms⁴. Despite the fact that the two approaches can both be applied simultaneously, there is still certain controversy as to whether or not such procedure should be authorized or practiced. This essay argues that textualism and contextualism are non-conflicting paradigms in the field of contractual interpretation through decisions of the judges supported with their rationale and statements of reputable practitioners proving the validity of such a method.

Literature Review and Gap Analysis

Interpretation of the contracts has been given much attention by many practicing lawyers and legal theorists as the problem of passing a just verdict. Mitchel argues that sometimes there is a controversy between actual practice of interpreting contracts and the law that is applicable in particular cases.⁵ The judge is to be aware of the all the cases of its application together with the objective context of the case in question. Unfair Contract Terms Act of 1977 provided the means for the judicial system to interpret the letter and the meaning of the contract thereby enhancing the capacity of the judges to decide on delicate matters with more precision. Mitchel proposes that a true purpose of a contract is to represent the parties’ perception of the subject and object of their mutual agreement.⁶ She identifies three different approaches to contract interpretation such as classical, neoclassical, and contextual. The first refers to the pre-1970s practice of literal understanding. The second works when inquiries are being made as to verify the meaning of the contract wording using a parties’ interpretation or third party. The third approach is fully dependent on the context and does not rely on the text. Mitchel seems to juxtapose the first two and the third, while classical and neo-classical approaches are labeled virtually the same. Staughton appeals to interpretation as the central aspect of practicing commercial law, which he especially relates to contracts.⁷ The same idea is supported by Lewison, who argues that interpretation is the main instrument of the law.⁸

Practicing lawyers raise the question of whether the interpretative approach is objective. Some professionals argue that there can be no objectivity in interpretation as it is a cognitive process and lies in the field of philosophy and metaphysics, while legal procedure requires strict adherence to the facts and literal meaning.⁹ The others, however, imply that each side of the conflict has their own unique understanding of the situation and thereby argues from the standpoint of their perception of the contract matter. A contract imbues the meaning that the sides put into words that they carefully choose in order to prevent misunderstandings. However, if such misunderstanding occurs, it ought to have a cognitive origin and rely on the meaning of the legal document that could have been either flawed or the affected party was improper at its understanding. The first group of arguers suggests that literary method is outdated and cannot be implemented in current legal practice in the field of commercial law. The other side pinpoints the necessity of a deep assessment of the reasons, context, and facts that lie beyond the textual realm. There is also a third group of legal theorists and practitioners that insist on recognizing and implementing the third method – a complex combination of textual and contextual interpretation of a contract. According to Lord Hodge, the contract must be viewed as a holistic item that incorporates a variety of elements that reach far away from the linguistic properties and formalities containing will and intentions of the parties.¹⁰ He argues that it has little relevance to the case if the textual and contextual analyses yield the same result because it is the balance between them that the court should be able to see.¹¹

The essential gap in the studies of both approaches is the fact that little attention is paid to their correlation in practice and theory.¹² The use of textual and contextual interpretation is rarely seen as mutually complementary but rather mutually exclusive. Such flaw in practice produces situations where different levels of authority issue judgments based on one paradigm while the others dismiss their rule and produce the contrary verdict based on another. Such inconsistency generates tension and waste of resources undermining the capacity of the judicial system for adequate conduct. Another gap is the objectivity of contextual interpretation and the extent of normality of its practice.¹³ As such, a concept of a reasonable person is a sizable overextension in the matter of contractual interpretation. It is occasionally used as an excuse for a lack of evidence or inability to provide a rationale for actions of one of the parties. Evidently, there is a need for a more well-round and precise approach that could alleviate the gaps in legal knowledge and eliminate flaws in practice.

Contract Interpretation through a Combination of Textual and Contextual Approach

Argument

The main argument consists in the adequacy of a combined assessment of textual or linguistic facts and facts that lie beyond the text in a sense that it provides a higher degree of objectivity than any of the two can manage separately. Textual information gathered from the contract itself incorporates the initial meaning that the parties imbued with the document. The context, on the other hand, such as the circumstances of the shift in the meaning of a contract for one of the parties, which have become the reason for inquiry and appeal. It is essential to grasp the combined wisdom that those approaches grant in order to produce an adequate verdict. This practice could save time and resources on appeals and further proceedings due to the fact that they represent a combination of methods rather than separate techniques.

Evidence

In Wood v Capita Insurance Services Ltd¹⁴ the High Court ruled that Capita’s claim falls under indemnity on the basis of the textual interpretation. However, the Court of Appeal overruled that decision in light of a contextual evidence. The Capita then argued for being misled by the agreements textual information that was dismissed by the court, as the false interpretation of the agreement does not make the contract non-binding. The disagreement then rose to the assumption that the Court of Appeal has overemphasized the textual information giving it the priority over the facts.

Lord Hodge passed the final judgment in the Supreme Court confirming that of the Court of Appeal. He used both textual and contextual information to support his decision. In addition, he appealed to the similar cases such as Prenn v Simmonds, ¹⁵Investors Compensation Scheme Ltd v West Bromwich Building Society¹⁶ or Rainy Sky SA v Kookmin Bank ¹⁷ where the Judge emphasised the meaning of sides’ understanding of the context in different time frames relevant to the contract. The appellant’s realization of the knowledge gap in the time of signing the contract and the time of finding the alleged discrepancy is crucial in defining the key facts to rely on for passing the right verdict. The case has passed through three levels of authority, which is extremely time-consuming for the sides and adds additional workload that could have been eliminated should the lower branches be equally aware of the possibilities that combined textual and contextual data can provide.

Counterargument

It may have been argued that the lower courts were right in argumentation chosen for their verdicts. A similar case, Arnold v Britton, presided over by the Supreme Court has shown that the court used only textual evidence and appealed to the reasonable person argument to close the case dismissing the contextual evidence.¹⁸ Provided in this case the textual evidence was enough to pass a verdict and the appellant was clearly in possession of adequate knowledge of terms of the contract, Capita’s argument could have similarly been dismissed.

Refutation

The reason for the choice of such a verbal form that the decision in Arnold v Britton was produced in was that the court found the textual argument the strongest. Thereby, it voiced the Judgment without any other evidence. However, this does not state that the Supreme Court had not considered contextual evidence, and, as Lord Hodge noticed, it is the duty of a court to be aware of all possible evidence.¹⁹ Additionally, Lord Bingham in his work has provided extensive evidence that courts have developed a firm standing on the use of contextual interpretation. However, it is solely in their power to exercise such a technique.²⁰

Argument 2

The second argument in favour of the viability of the combined approach is that it provides a deeper consideration for both parties’ opinion on matters, which positively influences the quality of the produced verdict. A well-rounded and weighted outlook on a case does not seem to produce a negative effect. Additional knowledge and regard for intention is the material that would only benefit the case. Referring to one and mentioning another provides a reason to believe that they are not incompatible.

Evidence

The speech of Lord Wilberforce in Wickman Machine Tool Sales Ltd. v L. Schuler evidently demonstrates that the court considered both practices and features – both the use of linguistic analysis and the contextual meaning of the paragraph over which the case is built. In his argument, he insists upon both the literary meaning of the words in the clause under discussion and the other clauses that are inherent to the document that, as he mentions, need to be considered holistically rather than as a list of separate and disconnected provisions.²¹ In addition, Stephen Davis in Khurana v Webster Construction Limited²²concluded that a sole word does give a sense of the general subject but does not reveal the whole scope of the problem and its understanding is thereby lies in the context. Thus, this illustrates the use of both approaches to help the cause of building a solid ground for a decision.

Counterargument 2

What is considered to be a collaborative effect of the two techniques may as well be called prioritizing one over another to choose the strongest rationale in order to build the final argument. Sir Geoffrey Vos argued that courts have a tendency to speculate on a meaning of words choosing the one they see best applied to the current business practice.²³ That could be an observation that produces the conclusion of ongoing duality and absence of a clear preference for any of the technique in the process of decision making in the court of law.

Refutation

The preference or speculation are by themselves indicate the process of choosing, which shows the interconnection and the use of both techniques to produce a decision. The unavailability of choice would have been demonstrated if either textual or contextual analysis were inapplicable per se. Since they can and do apply in multiple cases enumerated above, then it is safe to assume that the choice is based on the strength of the argument in the particular case or its suitability. Thus, in Investors Compensation Scheme Ltd v West Bromwich Building Society,²⁴ Lord Hoffman produced the five principles of reasonable contract interpretation, indicating that the word in itself is meaningful but people rarely incidentally misuse it in case of designing legally binding documents. It, therefore, forces the court to ascertain their meaning in the context to which they have been produced.

Summation

The adequacy and effect of the textual-contextual approach combination are vividly illustrated by multiple legal cases for a period of more than 30 years. The main arguments for contractual interpretation practice consist in the distinct nature of each of the methods that rather complement each other and serve a common cause by saving time, effort and giving a deep understanding of a case. Counterarguments were based on prioritization of one or another technique in the process of passing a verdict. They were refuted on the grounds of logic that underlines that the usage of both techniques in the same case does not imply the impossibility of their coordinated use.

Conclusion

To conclude, the collaboration of textual and contextual paradigms in the field of contractual interpretation has produced an immense impact on the process and understanding of contracts. Despite the fact that judges usually rely on one over another with a shift to the contextual, a variety of approaches contributes to better decision making. The assumption that they are not contradictory is evidenced by the substantial amount of legal practice. The implications of this essay include the popularisation and close scrutiny of the two paradigms in relation to contractual interpretation. The initial hypothesis has been proven by two arguments supported by evidence that includes reputable opinion, research, and legal cases. The counterarguments were refuted in a proper manner.

Bibliography

Berg, A “Thrashing Through the Undergrowth” [2006] 122 LQR 354;

Arnold v Britton [2015] UKSC 36, [2015] A.C. 1619;

Mitchell, C “Obligations in Commercial Contracts: A Matter of Law or Interpretation?” [2012] 65 CLP 455, 88;

Valcke, C “On Comparing French and English Contract Law: Insights from Social Contract Theory” [2009] JCL 69, 95;

McLauchlan, D “Common Intention and Contract Interpretation” [2011] LMCLQ 30;

Investors Compensation Scheme v West Bromwich BS [1998] 1 All ER 98;

Khurana v Webster Construction Limited [2015] EWHC 758 (TCC);

Lewison, K The Interpretation of Contracts (Sweet & Maxwell 2004);

Lord Bingham, “A New Thing under the Sun: The Interpretation of Contract and the ICS Decision” [2008] 12 ELR 374;

Lord Grabiner, “The Iterative Process of Contract Interpretation” [2012] 128 LQR 41;

Lord Nicholls, “My Kingdom for a Horse: The Meaning of Words” [2005] 121 LQR 577;

Lord Phillips, “The Interpretation of Contracts and Statutes” [2002] 68 Arbitration 17;

Lord Sumption, ‘The Harris Society Annual Lecture’ (the University of Oxford, 2017). Web.

Prenn v Simmons [1971] 1 WLR 1384;

Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900;

Buxton, R “Construction’ and Rectification after Chartbrook” [2010] CLJ 253;

Staughton, C “How do the Courts interpret commercial contracts?” [1999] CLJ 303;

Sir Geoffrey Vos, ‘Contractual Interpretation: Do Judges Sometimes Say One Thing and Do Another?’ (Chancery Bar, 2017). Web.

Wickman Machine Tool Sales Ltd. v L. Schuler A.G., [1974] AC 235, [1973] 2 All ER 39;

Wood v Capita Insurance Services Ltd [2017] UKSC 24;

Footnotes

1. Lord Nicholls, “My Kingdom for a Horse: The Meaning of Words” [2005] 121 LQR 577.
2. Lord Grabiner, “The Iterative Process of Contract Interpretation” [2012] 128 LQR 41.
3. Alan Berg, “Thrashing Through the Undergrowth” [2006] 122 LQR 354.
4. David McLauchlan, “Common Intention and Contract Interpretation” [2011] LMCLQ 30.
5. Catherine Mitchell, “Obligations in Commercial Contracts: A Matter of Law or Interpretation?” [2012] 65 CLP 455.
6. ibid 456.
7. Staughton, “How do the Courts interpret commercial contracts?” (1999) CLJ 303.
8. Kim Lewison, The Interpretation of Contracts (Sweet & Maxwell 2004) 231.
9. Lord Sumption, ‘The Harris Society Annual Lecture’ (the University of Oxford, 2017). Web.
10. [2017] UKSC 24.
11. ibid [32].
12. Richard Buxton, “Construction’ and Rectification after Chartbrook” [2010] CLJ 253.
13. ibid 12.
14. ibid [34]
15. [1998] 1 All ER 98.
16. [1971] 1 WLR 1384.
17. [2011] 1 WLR 2900.
18. [2015] 1 AC 1619.
19. ibid [12].
20. Lord Bingham, ‘A New Thing under the Sun: The Interpretation of Contract and the ICS Decision’ (2008) 12 ELR 374.
21. [1973] 2 All ER 39
22. [2015] 1 EWHC 758 (TCC).
23. Sir Geoffrey Vos, ‘Contractual Interpretation: Do judges sometimes say one thing and do another?’ (Chancery Bar, 2017). Web.
24. [1998] 1 All ER 98.