Contract interpretation is one of the most difficult areas of law. Given that law is all about words and meanings, one would expect that things must have gotten clearer over time. But that is not the case with still a fair number of cases making it to the highest courts simply on matters of interpreting clauses, sentences or even words.
Here’s another with some good take-away lessons from Australia (quote):
– Courts will only depart from the literal meaning of a clause if there is an ambiguity.
– If there is no ambiguity, the courts will apply the literal interpretation even if that may result in an unreasonable outcome. This is consistent with a range of recent decisions applying literal interpretations, including the High Court’s hearing of the special leave application in Western Export Services Inc v Jireh International Pty Ltd  HCA 45 and the High Court’s decision in Montevento Holdings Pty Ltd v Scaffidi  HCA 48.
– Evidence regarding prior negotiations is admissible for the purposes of a rectification claim but evidence of prior negotiations is not admissible for the purpose of interpreting the contract.