Contract Law - Litigating Hand

P. Madhusudhan Rao vs Lt. Col.Ravi Manan, and Another [Civil Revision Petition No. 4515 of 2014]: Andhra Pradesh High Court

Essential principles governing interpretation of documents/contracts

25. The dictionary meaning of the word interpretation is expound the meaning of, bring out the meaning of. But what does the words meaning mean? Does it mean (i) the literal meaning of the words used or does it mean (ii) the meaning the writer of the words had in his mind, i.e., his intention? Whether it means (i) or (ii) , the process would be that in the case of (ii) intention has to be ascertained by reference to the words used to express it. Unexpressed intention has not to be considered, but courts can consider presumed intention while interpreting a document. Thus, the modern law can be said to be that the purpose of interpretation is two-fold: (i) to ascertain the intention as expressed in the words, i.e., to consider what has actually been said; (ii) to consider what the parties intended to have said or ought to have said but did not, either because they never visualized such a state of circumstances arising or for any other reason. The task of interpretation would be easy if it were just to discover the intention of the parties as expressed in words. But the task of the court is to ascertain what the parties would have said or what they would have intended if the point had been considered by them at that time. The task involves a guessing game, which in legal terminology is called presumed intention. Any attempt to interpret the terms of document based on presumed intention is described as Courts endeavouring to achieve what the devil failed to do as devil does not know the intention of a man.

26. It is clear that the Court has to ascertain the intention of the parties based on the language used in the document. Time and again, the Court have laid down certain principles to interpret any document or clauses therein. In fact there are no statutory rules to interpret any document. But based on the settled principles, the Courts are interpreting the documents and any conditions contained therein. Rules of interpretation are mere working rules or as guidelines and are not binding on the Courts of law. Yet, they have some sanctity as they have been deduced from judicial decision over the years. It is found listed in Odgers Construction of Deeds and Statutes, used the listed rules by the Courts and they have acquired respectability. The Supreme Court in Delhi Development Authority v. Durga Chand has also noticed Odgers Rules and quoted them with approval and as the observation of the Supreme Court have the force of law of the land, it may be taken Odgers Rules (known as golden rules of interpretation) have been judicially recognized and may be adopted as Rules for interpretation of the documents in India. These Rules are listed hereunder:

1. The meaning of the document or of a particular part of it is therefore to be sought for in the document itself.

2. The intention may prevail over the words used

3. words are to be taken in their literal meaning

4. literal meaning depends on the circumstances of the parties

5. When is extrinsic evidence admissible to translate the language?

6. Technical legal terms will have their legal meaning.

7. Therefore the deed is to be construed as a whole. Apart from the said seven rules listed by Odger, it would be convenient to list the following rules for the sake of convenience are called additional rules and given number in continuation:

8. Same words to be given the same meaning in the same contract.

9. Harmonious construction must be placed on the contract as far as possible. However, in case of conflict between earlier or later clauses in a contract, later clauses are to be preferred to the earlier; while in a will, earlier clause is to be preferred to the later.

10. Contra Proferendum Rule-If two interpretations are possible, the one favourable to the party who has drafted the contract and the other against him, the interpretation against that party has to be preferred.

11. If two interpretation of a contract are possible the one which helps to make the contract operative to be preferred to the other which tends to make it inoperative

12. In case of conflict between printed clauses and typed clauses, type clauses are to be preferred. Similarly, in conflict between printed and hand written clauses, hand written clauses are to be preferred and in the event of conflict between typed and hand written clauses, the hand written calluses are to be preferred

13. the special will exclude the general

14. Rule of expression unius est exclusion alterius

15. Rule of noscitus a sociss

16. Ejusdem generic rule will apply both the contract and statute

17. place of Punctuation in interpretation of documents

27. From the Rules stated above, when the language used in a document is unambiguous conveying clear meaning, the Court has to interpret the document or any condition therein taking into consideration of the literal meaning of the words in the document. When there is ambiguity, the intention of the parties has to be looked into. Ordinarily the parties use apt words to express their intention but often they do not. The cardinal rule again is that, clear and unambiguous words prevail over the intention. But if the words used are not clear or ambiguous, intention will prevail. The most essential thing is to collect the intention of the parties from the expressions they have used in the deed itself. What if, the intention is so collected will not secure with the words used. The answer is the intention prevails. Therefore, if the language used in the document is unambiguous, the words used in the document itself will prevail but not the intention. Here, there is nothing ambiguous in clause (viii) of para 3 of the plaint and the parties intended to refer the agreement to P.Subba Rao only to know the meaning of the terms of the agreement but not for any other purpose. Therefore, the arbitration clause is limited to the extent to refer the document/agreement for interpretation and not for resolving any disputes between the parties. In such a case, the Court need not look into the intention of the parties in interpreting a particular clause in the agreement, when the language used in the document is unambiguous and clear.