English law
In English law the process by which courts decide what an agreement means is based on the objective view of a reasonable person, given the context in which the contracting parties made their agreement, though recent judgments suggest that the courts are reverting to a more rigid mode of interpretation paying closer attention to the formal expression of the parties’ intentions and taking more of a literal view of what they have said.The lead case remains, for now, Investors Compensation Scheme Ltd. v West Bromwich Building Society [1997] UKHL 28, which laid down that a contextual approach must be taken to the interpretation of contracts. In his judgment, Lord Hoffman set out five principles, so that contractual terms should be construed in accordance with:
1. what a reasonable person having all the background knowledge would have understood;
2. where the background includes anything in the ‘matrix of fact’ that could affect the language’s meaning;
3. but excluding prior negotiations, for the policy of reducing litigation;
4. where meaning of words is not to be deduced literally, but contextually; and
5. on the presumption that people do not easily make linguistic mistakes.
Omani law
By contrast, under Omani law, if there is any ambiguity in a contractual term, a subjective test is applied to discover what the real intention of the parties was when drafting the contract. Article 165 of the Civil Transactions Law, promulgated by the Civil Code, provides that:“If the wording of a contract is clear, it may not be departed from under the pretext of construing same to find the intention of the parties.”
However:
“If there is ambiguity in the phrase of the contract, it must be construed to find the mutual intention of the parties without limiting the construction to the literal meaning of the words. This shall be guided by the nature of the transaction, common practice and the trust and confidence which should exist between the parties to a contract.”
Further, article 166 of the Civil Code states that any ambiguity in a contractual term should be construed against the party seeking to rely on the provision.
However, it is important to remember that the parties are free to modify or exclude any of these statutory rules of construction by agreement and to stipulate their own rules of construction in their place.
