We review a lot of commercial contracts. And they often contain provisions which do not reflect the deal one or both of the parties thought they had reached.

The High Court has reminded businesses not to take contracts for granted: they mean what they say, not what businesses want to make them say!

In Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 the High Court published a short but emphatic judgment rejecting an application for special leave to appeal a NSW Court of Appeal judgment which rejected the right of one party to introduce evidence of surrounding circumstances to interpret the contract.

The dispute concerned the construction of one clause of a short “Letter of Agreement” concerning the franchising in Australia of Gloria Jean’s Gourmet Coffee Stores and the calculation of a commission to be paid for the supply of branded coffees, teas and other products.

The issue was whether that commission was payable not only on sales made to GJGC Stores by the supplier Jireh itself but also on sales by two companies associated with Jireh that commenced to supply those stores subsequent to the original agreement.

The end result was that as the clause only required payment of commission for supplies by Jireh, no commission was payable on sales by associated companies. There was no ambiguity and therefore no reason to take evidence as to what the parties intended.

The High Court endorsed the decision of Judge Macfarlan in the NSW Court of Appeal:

In my view the provision is unambiguous and there is no basis for departing from its literal meaning. In particular the provision would not have an absurd operation if construed literally. I do not agree with the primary judge’s apparent conclusion that it is permissible to depart from the literal meaning of an unambiguous provision in order to give it what the Court considers to be “a commercial and business-like operation”.

The Acts Interpretation Amendment Bill 2011 has been passed by Parliament and is awaiting Royal Assent.

UPDATE: Date of Assent 27 June 2011 . Download Act

Download consolidated Acts Interpretation Act 1901

The Bill amends the Acts Interpretation Act 1901 which contains definitions, principles and rules of interpretation that apply to all Commonwealth laws. It is the first comprehensive change to the Act since 1901.

It restructures the Act as well as including new definitions and updating existing definitions.

Concepts in the original Act have been modernised. For example the Bill adjusts the definition of ‘document’ to include things like maps, plans, drawings and photographs.

The Bill deals with participation in meetings by telephone and other methods of communication, for example, Skype or video-conferencing. The amendment provides that all participants may be given permission to participate by telephone or other means of communication. It also clarifies that a person who participates by telephone or other means of communication can be considered part of the quorum of the meeting. New provisions allow for a meeting to be held in two or more places at the same time. This allows a meeting to take place where the participants are in different locations and provides meeting organisers with more flexibility.

The Bill also inserts new definitions. For example:

Business day is defined as ‘a day that is not a Saturday, a Sunday or a public holiday in the place concerned’.

Penalty unit as the same meaning as in section 4AA of the Crimes Act 1914. This is a term widely used in Commonwealth legislation for both criminal and civil penalties.

Refrences to Australian Standards are also clarified.