BOOK REVIEW - THE CONSTRUCTION OF COMMERCIAL CONTRACTS
Cleary Gottlieb Steen & Hamilton LLP
THE CONSTRUCTION OF COMMERCIAL CONTRACTS. JW Carter, Professor of Commercial Law, University of Sydney. Hart, Oxford (2013) lxii and 632 pp, plus 2 pp Bibliography and 40 pp Index. Hardback £125.
Carter's The Construction of Commercial Contracts is an ambitious work on a number of levels. The book provides a summary of this labyrinthine area and proposes a novel rubric whereby the process of commercial interpretation can be analysed.
Carter sets out a principled approach to the law of construction, splitting the exercise into three stages: (i) the preliminary stage, where the existence of the contract and its context are established; (ii) the meaning stage, where it is determined from whose perspective a contract is to be construed and then which meaning is to be selected; and (iii) the application stage, where the legal meaning is applied to facts. These principles underpin the analysis throughout the book, the central theme of which is that context is all-important in achieving a commercial effect. The modern concern, Carter explains, is to have a “law of contract, rather than a law of contracts”. The discussion predominantly concerns English decisions, but also makes reference to those of Australia, with occasional comparisons to the American Restatement (Second) of Contracts and the UNIDROIT Principles of International Commercial Contracts.
The book is split into seven sections. Part I introduces the principles described above and makes general comments on the philosophical underpinnings of contract law. Carter declares the supposed contrast between certainty and fairness to be false, saying that, if “the application of contract doctrine—the principal source of certainty in English law—does not produce decisions which are objectively ‘fair', there is something wrong with the doctrine”.
Part II deals with construction, intention and implication. The book offers its own distinction between construction and implication—an exercise which has become increasingly blurred in recent years. Implied terms, Carter says, are “gap fillers”, so it is logically necessary to ascertain first what can be done “in the name of construction”, although there are limits to what construction can achieve. Many situations which were formerly described as involving implied terms in law are now characterised as applications of a default legal rule, which can be rebutted by construction of the instrument itself. The doctrines of frustration or repudiation were once seen as reliant on implied terms but are cited as examples of this shift away from implication. Implication, in Carter's rubric, therefore has a rather narrow mandate. If the content of an implied term is established simply by construing the contract, then “any term which is implied must be largely formal or even redundant”. Carter resists the view of Lord Hoffmann in Attorney-General of Belize v Belize Telecom Ltd