TurkAlert - Ecosse Property.pdf - INSURANCE • COMMERCIAL •...

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SummaryInEcosse Property Holdings Pty Ltd v Gee DeeNominees Pty Ltdthe High Court provided a littlefurther guidance on how to construe contractsthat, if read literally, might, due to some draftingerror or ambiguity, produce a commerciallyabsurd or odd result.BackgroundA regular source of error and confusion, even for lawyerswith the training and skills required to interpret contracts,is the extent to which surrounding circumstances canproperly be considered when interpreting a writtenagreement. A consideration of matters other than thetext of a disputed clause and a reading of the entireagreement is often either overlooked or undertakenincorrectly.The difficulties in this regard are often associated withtechnical rules about what is and what is not admissibleevidence in the process of interpretation. Then thereare restrictions on the extent to which evidence ofsurrounding circumstances, if admissible at all, can beemployed to arrive at the meaning of the text.In the present case the court had to decide whichof two competing interpretations of a clause bestsuited the commercial objects of the agreement. Thisrequired reference to the text of the agreement and thecircumstances in which it was created, even though theparties who did create it had long since sold their intereston.FactsThe dispute concerned a 99-year lease agreement formedin 1988 in respect of a block of rural land with no separatetitle. The parties to the agreement wanted to transfer itbetween them for an agreed sum of $70,000, which wasconsidered to be the value of the freehold.Importantly, a receiver represented the would-be sellerof the block and the larger parcel containing it, whichcould not be subdivided at the time. The lease agreementprovided for upfront payment of $70,000 in rent. Thedocument used to create the agreement was a standardform farm lease, which the parties modified, somewhatclumsily.

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Term
Fall
Professor
Dr Naveed
Tags
High Court

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