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The Wording of Contracts is All Important - but Context Matters Too
The wording of contracts is the first port of call for judges who are asked to interpret them – but context matters too. The Court of Appeal made that point in resolving a long-running dispute that arose from the closure of a packaging factory and the loss of over 100 jobs.
The factory’s demise was marked by bitter dispute between the company that owned it, its employees and their trade union. Four workers were summarily dismissed after occupying the premises and the union ran a high-profile campaign which generated much damaging publicity for the company. After the factory ultimately closed, all 109 remaining employees were made redundant.
Following negotiations between the company and the union, a settlement was finally agreed, one of the terms of which was that the employees would receive ’90 days' gross pay’. However, a dispute arose thereafter as to the correct interpretation of that phrase. The union argued that the sums payable should be worked out by calculating the average gross daily pay of each worker and multiplying that figure by 90. The company argued that the phrase referred to 90 days on the calendar, an approach that resulted in a less generous outcome for the employees.
Following a hearing, a judge preferred the union’s reading of the phrase. The Court, however, took the opposite view and allowed the company’s appeal. It noted that its task was simply to ask what the phrase meant in the context of the facts known to both the union and the company. When that holistic approach was taken, it was clear than an objective reader would have naturally understood that the mutual intention was to employ the calendar method of calculating the 90 days.