Incorporation of charterparty terms by general words

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The incorporation of charterparty terms by general words is a particular instance of contractual interpretation, principally of the contract into which the terms are to be incorporated. In Rainy Sky SA v Kookmin Bank, Lord Clarke of Stone-cum-Ebony JSC, summarising the effect of earlier decisions, emphasised that

"... the exercise of construction is essentially one unitary exercise in which the court must consider the language used and ascertain what a reasonable person, that is a person who has all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract, would have understood the parties to have meant …."

Though, "[where] the parties have used unambiguous language, the court must apply it", Lord Clarke continue3:

"If there are two possible constructions, the court is entitled to prefer the construction which is consistent with business common sense and to reject the other."

Though one might perhaps doubt the utility, in particular situations, of general statements of this type, Lord Clarke’s preference has immediate application where there is genuine ambiguity, and only one interpretation which is consistent with business common sense. It seems reasonable to suppose that ambiguity includes the use of phrases the legal effect of which is uncertain. The real value of Rainy Sky, though, is to remind us that detailed traditional rules must always be judged against "the ultimate aim of interpreting a provision in a contract". To the extent that they do not, the technical rules should surely give way. In a similar vein, general statements in the Privy Council (this time in Attorney General of Belize v Belize Telecom Ltd) on the implication of terms into a contract, even if they might have little effect on the actual implication of terms into commercial contracts in particular situations, at least guard against treating "alternative [traditional] formulations of the question as if they had a life of their own". The detailed traditional rules are the servants, not the masters, of the general principle.

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