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Contract, interpretation

CGU Insurance Ltd v Porthouse [2008] HCA 30. Gummow, Kirby, Heydon, Crennan, Kiefel JJ.

Their Honours [43]: "There was no disagreement about the principles to be applied to the task of interpretation. Gleeson CJ in McCann v Switzerland Insurance Australia Ltd [2000] HCA 65; 203 CLR 579 said:

'A policy of insurance, even one required by statute, is a commercial contract and should be given a businesslike interpretation.

"Interpreting a commercial document requires attention to the language used by the parties, the commercial circumstances which the document addresses, and the objects which it is intended to secure'."

ATF Services PL v Ronald Chapman & Anor [2011] NSWSC 1024. Pembroke J.

4 The proper construction of an agreement and the identity of the parties bound by it must be ascertained by reference to the language of the agreement and the mutually known surrounding circumstances including, importantly in this case, the evident purpose of the agreement and its provisions: Empirnall Holdings Pty Ltd v Machon Paull Partners Pty Ltd (1988) 14 NSWLR 523 (CA); Franklins Pty Ltd v Metcash Trading Limited [2009] 76 NSWLR 603 (CA).

Geocast Constructions v Coates Hire [2011] NSWSC 126. Harrison AsJ.

20 The construction of a contract is a question of law. The rights and liabilities of the parties are to be determined objectively. It is not the subjective beliefs or understandings of the parties about their rights and liabilities that govern their contractual relations.

What matters is what each party by words and conduct would have led a reasonable person in the position of the other party to believe. References to the common intention of the parties to a contract are to be understood as referring to what a reasonable person would understand by the language in which the parties have expressed their agreement.

The meaning of the terms of a contractual document is to be determined by what a reasonable person would have understood them to mean. That, normally, requires consideration not only of the text, but also of the surrounding circumstances known to the parties, and the purpose and object of the transaction: see Codelfa Construction Pty Limited v State Rail (1982) 149 CLR 337 at 350; Pacific Carriers Ltd v BNP Paribas [2004] HCA 35 at [40]; (2004) 218 CLR 451 at 462; Toll (FGCT) Pty Limited v Alphapharm Pty Limited & Ors (2004) 219 CLR 165 at 179.

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