CONSTRUCTION IN CONTRACT LAW: A LOGICAL AND STRUCTURED APPROACH

Abstract

Construction is a pervasive feature in contract law. It is a technique employed to define a contractual rule, ie, a rule that makes up part of a contract. In construction, the objective intention of the parties is inferred from the choice of words in the contract. But construction has a narrow focus: the aim is to resolve a particular question of intention. From this starting point, construction fits within a logical structure. It consists of four stages. First, the relevant question is defined. The question may relate to any aspect of the contractual relationship. Second, potential answers to the question are put forward. Each answer amounts to a competing ‘construction’, ie, a competing formulation of the disputed rule that forms part of the contract. Third, arguments in support of each construction are formulated. The arguments are built from the admissible materials, ie, the text, the potential meanings for words, the background to the transaction, the purpose of the contract, the consequences of the competing constructions, and normative factors, such as business commonsense. In the final stage, the ‘correct’ construction is chosen as a matter of probable intention by evaluating the competing arguments. The benefits of the proposed model are two-fold. First, it offers a comprehensible means of understanding construction at a level of sophistication warranted by the complexity of the process. Through the model, one can understand the reasons for a decision in a construction case in terms of the composition of competing arguments at play. In particular, construction disputes often involve a tension between: (i) arguments as to intention drawn from the meaning of the words agreed; and (ii) arguments as to intention that are based on the purpose of the contract or the consequences of the competing constructions. Usually, in the case of such tension, the construction that succeeds is the one that fits best with the contract taken as a whole. Understanding construction in this manner can bring clarity and consistency to judicial reasoning in construction. It can also explain the role of construction in contract law. This is the second benefit of the model. By defining construction in its core interpretative function, it can be distinguished from analogous contract law techniques. The contractual relationship is governed by a combination of rules agreed by the parties and rules imposed by doctrine and statute. Contract law employs a variety of techniques and processes to administer these rules. Construction is but one of these techniques: it is the primary means through which contractual rules are defined. However, contractual rules can also be defined as a matter of implication or rectification. In addition, many doctrinal rules require conclusions regarding intention that may or may not be established on a constructional basis. Hence, the thesis presents not only a novel way to understand construction, but also a fresh perspective on the nature of contract law.