Cases - Chartbrook Ltd v Persimmon Homes Ltd and others
Record details
- Name
- Chartbrook Ltd v Persimmon Homes Ltd and others
- Date
- [2009]
- Citation
- UKHL 38
- Legislation
- Keywords
- Tendering and procurement
- Summary
-
The court determined that prior negotiations are not admissible except in limited cases, known as the 'private dictionary inroad', where evidence of negotiations showed the parties had agreed a particular meaning which had then been used in the contract without definition.
Drawing on Investors Compensation Scheme, the court concluded that the exclusion of negotiations from the admissible background facts when construing a contract was based on policy considerations. The court was also influenced by the need to protect third parties who might need to understand the contract, for example on assignment. If negotiations were admissible evidence, third parties would not be able to make safe assumptions about a contract's meaning without carrying out an enquiry into the negotiations that took place. The court therefore rejected the defendant's argument and upheld the bar on use of evidence of the parties' negotiations in construing a contract:
'... there is a powerful need to preserve on policy grounds a rule which excludes the parties' negotiations from the admissible background when construing, rather than rectifying, a commercial contract.'
The court then considered the cases said to establish the 'private dictionary inroad' into this principle. Although it would have preferred to have no exceptions to the rule and to explain the cases as being concerned with rectification, the court felt bound by the Court of Appeal's earlier decision in ProForce to allow this exception: the exception should not, however, extend to a case in which the word, phrase, clause or term is expressly defined in the contract.