The strange death of literal England

19 November 2009

English courts pride themselves on their commercial approach to the interpretation of contracts. To the extent that this prevents a party succeeding on an obviously unmeritorious technicality, no one will object. But problems emerge when a technicality is not so obvious and, still more so, if the wording of the contract points in one direction but judicial desires in another. Can the parties' words be ignored and, if so, when? The recent Sigma case, about the distribution of assets on the failure of a structured investment vehicle, has brought these issues to the fore, with the suspicion that the courts – particularly the higher courts – are stepping too far in the direction of re-writing contracts rather than merely construing them. By doing so, they risk generating uncertainty.

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