Contract
Contract Interpretation and Exclusion Clauses
Sattva, Tercon, and the death of fundamental breach.
Sattva (2014) re-categorised contract interpretation as a question of mixed fact and law, attracting deference on appeal. Interpretation involves reading the terms in light of the surrounding factual matrix known to the parties at the time of contracting. Tercon (2010) replaced the unwieldy doctrine of fundamental breach with a three-step inquiry: does the clause apply on its true construction; was it unconscionable when made; and even if valid, should the court refuse enforcement on overriding public-policy grounds?
Key principles
- Factual matrixObjective surrounding circumstances at contract formation.
- Standard of reviewMixed fact-and-law (deference) — except extricable legal questions.
- Tercon three-stepConstruction; unconscionability; public-policy override.