Genuine Ambiguity only: when are the post-contract actings relevant to interpretation?
Summary
The Court of Session has recently reiterated that the court will not (usually) look to post-contract actings as an assistance for the construction of a contract. In Scottish Ministers v Scot Roads Partnership Project and other [2022] CSOH 19, Lord Clark stated that the ‘ambiguity’ that was needed to make the post-contract actings relevant, was not to be compared to the ‘difficulties’ in construction. It was suggested that a word or phrase should be considered so that the Courts could interpret the contract in more than one way where necessary.
Where parties disagree as to the meaning of a contractual term, the interpretation of the term is not equivalent to there being a “genuine ambiguity” to the meaning of the term.
Background
The decision is a result of a crystalised dispute on the M8, M73 and M74 motorway improvement project (“MIP”).
The MIP works were initially contracted for the design, build, finance, and operate (“DBFO”) agreement, and a sub-contract identified as the New Works Agreement.
As the progress of the MIP was slower than expected by the construction programme, an Agreement for General Settlement (“AGS”) was entered by the employer (the Scottish Ministers), the contractor (Scots Road, the first defender), and the sub-contractor (a joint venture of the second and third defenders).
Claims were made by Scot Roads under the DBFO, leading to a dispute in regards of a particular term of the AGS. Clause six provided:
“In consideration of this Agreement and sums due thereunder being paid to [Scot Roads] and [the sub-contractor], the [sub-contractor] and [Scot Roads] waive the right to all claims of any nature whatsoever (other than those which may flow from a Scottish Ministers Change or a Qualifying Change in Law) which the [sub-contractor] and/or [Scot Roads] may have at the date of this Agreement or in the future against or in respect of the Scottish Ministers and/or the Company relating to the New Works.”
The Scottish Ministers insisted that the effect of the sixth clause was to relinquish (with limitations) all financial claims under the DBFO. However, Scot Roads argued that the only claims relinquished were out of circumstances pre-dating the AGS, therefore the claims that arose out of circumstances post-dating the AGS were left unaltered.
Issue
The parties overarching dispute was in respect of the proper construction of clause six. More specifically, whether it should be corrected by the courts.
Prior to the matter being resolved, the case would need to go to a ‘proof before answer hearing’, meaning the court would need to hear the evidence before addressing the legal issue at hand.
However, Lord Clark allowed two discrete issues to be considered and debated thus negating the requirement for a proof before answer hearing.
It was made certain by the Scot Roads that statements in its pleading, included a statement that the AGS was a temporary solution which allowed the DBFO to continue operating in relation to the party’s connection after entering the AGS.
It was debated whether the averments were relevant because, while there is an overall rule that post-contract actings were irrelevant, an exception to this was where there was an ambiguity in the contract.
The parties agreed clause six did not clearly state its intention, they did however argue as to each of their interpretations as to how it should be construed.
Scot Roads claimed that clause six meant that there was obvious and accepted ambiguity, leaving the events of what happened after conclusion of the AGS relevant.
The Scottish Ministers presented that as a matter of law, post-contract actings are not relevant to the clarification of a contract term. It was also noted that this proposition was forced on the Court at an earlier stage by Scot Roads.
Decision
Lord Clark noted that under Scots Law the general rule was that there was no relevance between post-contract actings and construction. It was concluded that even though some case law could support the argument of post-contract actings being seen as ambiguous, it was a limited claim. An ambiguity within this case was not to be compared with a ‘difficulty’ of construction, though, there needed to be a word which could be interpreted in multiple ways.
Lord Clark noted that such “genuine ambiguities” are rare and that
“[w]hat tends to occur in a contractual dispute about meaning is not precisely what the word or phrase means, but how it is to be understood in the particular context.”
The case argued that “in the future” was an ambiguous phrase; Lord Clark did not agree. Lord Clark believed that there are no words within clause six, that could be seen to have multiple meanings. He also stated that where the commercial common sense was invoked as an interpretation means, it was commercial common sense at the time the contract was entered. There was no authority for the intention that post-contract actings could be taken as evidence to show what the parties considered in respect of commercial common sense.
Comment
This case from the Court of Session demonstrates the court’s approach to the use of contractual interpretation and the limitations imposed.
It should therefore be noted that parties will only be able to rely upon post-contract actings as evidence of interpretation when a word or phrase in a contract truly can be seen to have multiple meanings.
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