CHOOSING THE INTERPRETATION WHICH IS CONSISTENT WITH BUSINESS COMMON SENSE

The Supreme Court in Rainy Sky SA v Kookmin Bank [2011] UKSC 50, [2011] 1 WLR 2900 has allowed an appeal from the decision of the Court of Appeal (on which see our June 2010 issue, pp10-12) and held that the claimants were entitled to claim payment from the defendant bank under the terms of the performance bond. The point of more general interest which emerges from the case is the conclusion that, where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.

The background

The facts of the case are set out in more detail in our December 2009/January 2010 issue (pp10-12, where the decision at first instance is discussed) and in our June 2010 issue (also at pp10-12 where the decision of the Court of Appeal is examined). Given that we are here concerned with matters of general importance (rather than matters that are only of significance to the parties to this particular dispute) it is not necessary to enter into the details of the particular issue of construction which was in dispute between the parties. It suffices to note that there are two points of general significance which emerge from the decision of the Supreme Court.