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Implications of law and terms in realty

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Board had been created to compensate certain investors who had claims in tort against the Building Society. The assignment clause said that the investors assigned all claims to the Board except “any claim (whether sounding in rescission for undue influence or otherwise)”. The result of a literal interpretation of this clause was “commercial nonsense”, for it meant that the assignee could not sue for damages. Lord Hoffmann set out “five principles” of interpretation the application of which to this clause produced the following result: investors assigned all claims except “any claim sounding in rescission (whether for undue influence or otherwise)”. The essence of Lord Hoffmann’s five principles is that the meaning of a document is not the meaning of its words simpliciter, but the meaning those words would have conveyed to a “reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract”. “Background knowledge”, save in two exceptional cases that we can ignore for the present purpose, does not include pre-contractual negotiations
However, just like Lord Hoffmann’s “assumption of responsibility” approach to damages, it is noticeable that the conventional approach will yield the correct result in a majority of cases. This is not because Lord Hoffman’s test in ICS is deliberately intended to apply to a predefined set of “exceptional” cases, but simply because the “reasonable person” in ICS would in most instances assume that the meaning of an instrument is the dictionary meaning of its words grammatically construed, with no additions, just as the “reasonable addressee” in Belize would normally assume that if a contract is silent as to the happening of a certain event, it was intended that that event has no legal consequences.
Source: NIMMA BENGALURU

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