First Principles of Business Law

2.1. Interpreting the terms of a contract

2.3. An objective test of intention

Read through the same facts again and then consider a second argument raised by B.

A, an architect, leases office space in B's building for three years. One clause in the lease says: 'At any time during the lease, B will, at his own cost, carry out any interior alterations that are reasonably necessary for the conduct of A's business'. Another clause gives either party the right to terminate the lease by giving six months notice. After a year, A gives B notice that he is terminating the lease in six months time. A also asks B to install extra office partitions in the leased offices because he has now employed more staff.

B argues that even if the natural meaning of the word 'during' includes periods of notice, this is not the meaning that he and A actually intended it should have. Will this argument help B?

(a) Yes. If the parties actually intended that a word or phrase should have a special meaning, that is the meaning that the courts will use to interpret the contract.

(b) No. The courts determine the meaning of words and phrases used objectively, so that what the parties may have actually intended is irrelevant.