A contract’s plain meaning may override commercial good sense.
In the case of Arnold v Britton [2015] UKSC 36 the Supreme Court of England and Wales delivered a significant judgment on interpreting contracts, concluding that where the contractual wording is clear, the courts are reluctant to depart from its plain meaning to invoke considerations of commercial good sense.
This judgment reinforces a recent trend in which the courts have downplayed the importance of looking at whether or not a contract makes commercial common sense unless there is ambiguity or lack of clarity in the language used. The result is that where an event occurs that was not intended or contemplated by the parties, judging from the contract language used, the courts will only give effect to the parties’ intention when it is clear.
In the cited case the decision meant tenants had to pay a service charge much higher than they ever anticipated. Despite the harsh outcome, Lord Neuberger was clear that “there is no principle of interpretation which entitles a court to rewrite a contractual provision simply because the factor which the parties catered for does not seem to be developing in the way in which the parties may well have expected“.