Abstract
LL.M.
The purpose of the interpretation of contracts is to ascertain the intention of the parties by
interpreting the meaning of the words used in the contract. The difficulty is whether it is
permissible in contract law to rely on extrinsic evidence as an aid in the interpretation process.
The research study does not consider subsequent conduct. The research study is based on the
premise that once the agreement has been reduced into writing and signed by parties, it is
considered the exclusive record of the agreement between the parties. Consequently parties
are bound by the written contract and are prohibited from relying on extrinsic evidence of
background, prior negotiations and antecedent contracts for the purposes of interpreting the
contract. In recent years there has been a steady shift from the strict textual approach to a
contextual approach in both South African and English law jurisdictions.
This research study traces this shift through a discussion of landmark cases which set out the
principles that brought about the shift and criticisms that have been levelled against these court
decisions. The research study further discusses how the parol evidence and clear meaning rules
have been applied by courts as a safeguard to ensure, inter alia, certainty in the interpretation
process. The dissertation also analyses how the courts have had to bend the aforementioned
rules to make background information or the “factual matrix” readily admissible to, inter alia,
minimise the possibility of an unjust outcome in the interpretation process. The study compares
the treatment of prior negotiations and antecedent contracts in the interpretation process in both
South African and English jurisdictions and considers whether there should perhaps be a lenient
approach to the admissibility of prior negotiations and antecedent contracts to aid in the
interpretation process in South Africa.