Report No. 199

Interpretational issues in standard form contracts:

In this context, it is to be noted that in Anson's Law of Contracts, 26th Edn. (page 136), the learned author has dealt with the question pertaining to construction of terms in a written contract which can create hurdles. The author states:

"An agreement ought to receive that construction which its language will admit, which will best effectuate the intention of the parties, to be collected from the whole of the agreement, and greater regard is to be had to the clear intent of the parties than to any particular words which they may have used in the expression of their intent. The proper mode of construction is to take the instrument as a whole, to collect the meaning of words and phrases from their general context, and to try and give effect to every part of it. However, if the words of a particular clause are clear and unambiguous, they cannot be modified by reference to the other clauses in the agreement."

If this principle is to be applied to standard-form contracts, it will be seen that even if the party having greater bargaining position has introduced exemption clauses unilaterally in its own favour, the court's job is to give full effect to those clauses which have been agreed upon, even if they are unreasonable or unconscionable. The freedom of equal bargaining power, in such cases, is thus largely an illusion. The contracts in the standard forms do generally contain terms and conditions which are unreasonable and unfair resulting from inequality of bargaining power or no bargaining power at all.

The question arises as to the remedy against such unconscionable clauses in contracts.