The UK Supreme Court has had another opportunity to clarify the law on contractual interpretation in Wood v Capita Insurance Services Limited [2017] UKSC 24, following the recent decision of Arnold v Britton [2015] 2 WLR 1593.  

The case involved a sale and purchase of shares.  After completion of the sale, the company's selling practices were brought into question, resulting in the implementation of a costly remediation scheme to compensate affected customers.  Liability depended upon the interpretation of the indemnity clause.

In delivering the Court’s judgment, Lord Hodge reiterated that textualism and contextualism are not conflicting paradigms.  The search for objective meaning must be reached having regard to both the language of the provision in the context of the contract, and, depending on the nature, formality and quality of its drafting, on the wider context as a whole.

When the Court can determine two objective meanings, the Court may favour that which aligns with commercial common sense.  However, the Court will be cautious, as one side may have agreed to something that did not serve its interests, or a provision may have been a negotiated compromise.

As was reflected in the outcome, the Court will not save a party from a bad bargain when the language and drafting clearly reveals the objectively intended meaning, however unfavourable it may be.

See the Court's decision here.