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the importance of business common sense

25 November 2011

The Supreme Court has recently commented on how it decides between two reasonable interpretations of a clause (Rainy Sky SA v Kookmin Bank).

The Court confirmed that “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”. In keeping with this, the Court found against the party that was unable to advance any commercial reason why its interpretation should be adopted.

The case continues the move by the Supreme Court away from a strict (and some might say, overly literal) approach to the interpretation of contracts to a position where commercial purpose is generally more important than the niceties of language. This is welcome, but does it really amount to much more than the members of the Court confirming that they want to sleep well at night?

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