RWE Npower Renewables Limited v JN Bentley Limited [2013] EWHC 978 (TCC)
Where a contract consists of a number of documents, the first step is to consider all the documents together and only after that has been done consider any priority clause to deal with ambiguities.
This case involved a construction contract based on standard industry terms. The contract consisted of a number of documents and there was a clause setting out the order of precedence in which they should be read and construed. It was submitted that there were discrepancies between two of the documents which raised issues as to which should take precedence.
The High Court (Akenhead J) stated that where a contract consists of a number of documents:
- One needs to look at all the contract documents to determine the meaning on any given topic. In commercial contracts there can be ambiguities, but on analysis apparent ambiguities may not be ambiguities at all.
- Where there are irreconcilable ambiguities, the courts over many years have adopted mechanisms to overcome them, such as the contra proferentem principle.
- Here, the parties did set out an order of precedence. The clause was prefaced by the words that all documents were "deemed to form and be read and construed as part of this Agreement". Therefore, the contract was to be construed in the usual way by reference to all the documents forming part of the contract. What one should not do was to carry out an initial contractual construction exercise on each of the material contract documents on any given topic and then compare the results of that exercise to see if there was an ambiguity. If it was possible to identify a clear and sensible commercial interpretation from reviewing all the contract document which did not produce an ambiguity, that interpretation was likely to be the right one. In these circumstances, one did not need the "order of precedence" to resolve an ambiguity.
- On the facts in this case, there was no material ambiguity between the documents once the contract as a whole was analysed.
Comment: In matters of contract interpretation, the courts have been preferring interpretations that accord with business common sense when the deal as a whole is considered. This decision is consistent with that approach.
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