Accuracy, Utility and Gateways: Justifications(?) for Controlling the Use of Surrounding Circumstances in Contractual Interpretation

Abstract

The status of the principle of contractual interpretation enunciated by Mason J in Codelfa Construction Pty Ltd v State Rail Authority of NSW (1982) 149 CLR 337 is uncertain. That principle being that ambiguity is first required when interpreting a contract before recourse can be had to evidence of the particular ‘surrounding circumstances’ known to the parties at the time of entering into the agreement. In this article, I assess from first principles the desirability of this so-called ‘ambiguity gateway’. I draw on developments in the philosophy of language and mind to illustrate how the ambiguity gateway detracts from the interpretive process. I then consider to what extent the ambiguity gateway is justifiable on the basis of making contractual disputes more efficient in globo (that is, on the basis of traditional rule-based utilitarianism). I conclude that it is incumbent on those making this utilitarian claim to justify their conclusion that the ambiguity gateway performs an efficiency enhancing function. Given the sceptical arguments presented in this article, it is doubtful that the ambiguity gateway will ever be justified on the basis of rule-based utilitarianism. In the absence of such a justification, the principle should be abolished.