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4. INTERPRETATION OF EXPRESS TERMS

4.1 Introduction
In the section on incorporation of terms we dealt with the question of which terms form part
of the contract. Once it has been decided that certain terms form part of the contract it may
become necessary to decide what they mean. This will usually come about because one party
favours a particular interpretation of a term and the other party favours a different interpretation.

Example 6.17
X, a tourist visiting Johannesburg on business, hires a car from a car rental agency. Clause 9 of the rental
agreement reads as follows:
The car rental agency will provide insurance coverage for damage to the car when the car is driven by the
lessee or the lessees immediate family, employer, employee or partner.
X ta!es the car to the "andton Towers #otel. #e hands the !eys to a par!ing valet and as!s him
to par! the car in the hotels par!ing garage. $hile being driven by the valet, the car collides with another
car emerging from the garage. %s the car covered by insurance according to the terms of the policy& This
depends on the meaning of clause 9. '(ased on Travellers Insurance Company v Budget Rent-a-Car 9)* +
,d -* ',nd Cir *99)...

The section on interpretation is concerned with how the courts find the meaning of
express terms of the contract. The issue of interpretation does not arise in the case of implied
or tacit terms.
The process of interpretation is aimed at finding the common intention of the parties. In the
past, courts used a staged approach to interpretation (also known as the Delmas Milling
approach). In other words, they did not look at all the available evidence at once: instead they
started narrowly and then add more evidence in increments. They first looked at the most reliable
evidence to prove the parties intention (the contract itself). If they could determine the meaning
of the terms in question with this evidence, the interpretation process stopped. If the meaning
was still unclear, they moved on to the next stage where less reliable evidence was used. The
process was repeated until the courts could ascribe a meaning to the term in question. If no
meaning could be found after all stages have been completed, the term (and possibly the whole
contract) would be void for vagueness.
The staged approach to interpretation was closely allied to the parol evidence rule, which
applies to written contracts. As seen before, the rule had two components, the integration rule
and the interpretation rule. In this section, we will only consider the interpretation rule. In terms of
the interpretation rule, the court would only look at the document to ascertain the meaning of
the express terms of the contract. Like the integration rule, the interpretation rule had exceptions.
If the meaning of the contract was unclear after the court has examined the document, the court
could hear oral evidence as to the meaning of the contract.
The result of both the staged approach to interpretation and the parol evidence rule was
that the court did not look at all the available evidence in the first stage of interpretation. Instead it
tried to determine the meaning of the terms by looking only at the contract itself. It only carried on
to further stages if the meaning of the contract was still unclear or ambiguous.
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The staged approach sometimes led lead to unintended results, contrary to the parties
subjective intentions.

Example 6.18
In re Sopers Estate *9/- ',/0. 1$ ,23 'an 4merican case.
Facts: %ra "oper was married to 4deline, but wanted to start a new life. #e therefore pretended to
commit suicide and moved to a different town, where he assumed a new name 'John 5oung.. 4deline
believed that %ra was dead. %n the new town, he 6married 7ertrude, who was unaware of his previous
life. %ra then formed a business partnership with X, who was also unaware of his bac!ground. 8ne of the
terms of the partnership contract was that if one of the partners died, the other partner had to pay the
proceeds of an insurance policy to the deceased partners wife.
%ra became depressed and committed suicide 9 this time for real. 4deline read about the suicide
and realised for the first time that the first suicide was a fa!e. "ince she was still legally married to %ra at
the time of his death, she claimed the proceeds of the insurance policy. The :uestion was what the
reference to 6his wife in the partnership contract meant: did it refer to 4deline 'his legal wife. or to
7ertrude 'his 6wife at the time the partnership contract was concluded.&
Court held: %n the first stage of interpretation, one loo!ed only at the contract itself. The words used in
the contract were clear and unambiguous: the money had to go to %ras 6wife. This clearly meant %ras
legal wife. "ince the meaning was clear, evidence as to the surrounding circumstances was not
permissible. 4deline was %ras legal wife and, therefore, she was entitled to the money.

For this reason, the staged approach to interpretation was severely criticised. Several
judgments suggested that the staged process of interpretation should be reconsidered (Cinema
City (Pty) Ltd v Morgenstern Family Estates (Pty) Ltd 1980 (1) SA 796 (A) at 8036; Sun
Packaging (Pty) Ltd v Vreulink 1996 (4) SA 176 (A) at 183IB, 184E; Van der Westhuizen v
Arnold 2002 (6) SA 453 (SCA) paras 2223).
The SCA finally resolved the issue by holding that the staged approach to interpretation
no longer forms part of our law. Instead courts must follow a unitary approach in which all
relevant considerations are weighed up against each other.

Bothma-Batho Transport (Edms) Bpk v S Bothma Seun Transport (Edms) Bpk ,)*2 ',. "4 292 '"C4
;$hilst the starting point remains the words of the document, which are the only relevant medium
through which the parties have e<pressed their contractual intentions, the process of interpretation does
not stop at a perceived literal meaning of those words, but considers them in the light of all relevant and
admissible conte<t, including the circumstances in which the document came into being. %nterpretation
is no longer a process that occurs in stages but is =essentially one unitary e<ercise=.>

The relevant factors can be grouped together as follows:
(1) The wording of the contract
(2) The context in which the wording is used
(3) Canons (rules) of construction

We will now consider each of the factors in more detail.

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4.2 The factors to consider during interretation
4.2.1 !ording of the contract
The starting point of interpretation is to look at the written or verbal words used by the parties
when contracting. This is known as linguistic treatment. There are some general rules
relating to linguistic treatment:
Words are generally interpreted according to their ordinary grammatical meaning. Quite
often the court will refer to a dictionary for this purpose.

Example 6.19
4 contract refers to the sale of a 6horse. 4s a general rule, the court will interpret this to mean a four?
footed animal used to carry or pull things and people.

Courts will also carefully analyse the grammar and punctuation used in a phrase or
sentence in order to determine its meaning.

Exercise 6.9
@ leases premises from A in terms of a long?term lease. The contract provides that the landlord 'A. can
cancel the lease if the tenant breaches the contract. The relevant clause reads as follows:
6The landlord may cancel the lease if the tenant fails to pay the rent promptly on due date, or if the tenant contravenes any
of the other terms of the lease and fails to remedy such latter breach within seven days after the receipt of written notice
calling upon him to do so.
The lessee fails to pay the rent on the due date. The legal issue is whether the re:uirement of written
notice applies only !" the tenant contravenes any o" the other terms o" the lease 'other breaches., or
whether it also applies !" the tenant "a!ls to pay the rent promptly on due date 'late payment.. '(ased on
the facts of #r!tchard #ropert!es (#ty) $td v %oul!s *9B0 ',. "4 * '4...
'a. %s the landlord obliged to give the tenant written notice to remedy the late payment if he wants to
cancel the contract& C<plain why or why not.
.
.
.
'b. $ould your answer differ if the clause read as follows& $hyD$hy not&
The landlord may cancel the lease if the lessee fails to pay the rent promptly on due date, or if the lessee contravenes any
of the other terms of the lease and fails to remedy such breach within seven days after the receipt of written notice calling
upon him to do so, the landlord may cancel the lease.
.
.
.
'c. $ould your answer differ if the clause read as follows& $hyD$hy not&
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The landlord may cancel the lease if the lessee fails to pay the rent promptly on due date or if the lessee contravenes any
of the other terms of the lease, and fails to remedy such breach within seven days after the receipt of written notice calling
upon him to do so.
'1ote that there is now a comma after the words other terms o" the lease..
.
.
.

4.2.2 The conte"t in #hich the #ording is used
Words and phrases in a contract cannot be read in isolation. The courts will also look at
the context in which the words were used to determine the meaning of the phrase.

The court will consider the meaning of a phrase in the context of the contract as a whole.
The court may deviate from the ordinary grammatical meaning if the ordinary meaning would
lead to results that are inconsistent with the rest of the contract.

Example 6.20
%f the contract refers to possible mechanical defects in the 6horse, it will be clear that this cant refer to
an animal. The court will then loo! at other meanings of the phrase, for instance a mechanical 6horse,
which is a !ind of vehicle that can tow heavy trailers.

In addition, the court will look at evidence of an identificatory nature, in other words,
evidence to identify persons and objects referred to in the contract.

Example 6.21
4 sells his 6priEe?winning race horse to (. 4 has five race horses. 8utside evidence will be allowed to
identify which of the five horses has won a priEe.

The court will also look at evidence of the nature and purpose of the contract, and its
genesis (the events leading to formation of the contract).

Example 6.22
Botha v &enter *999 '2. "4 *,33 '8.
( bought a pump engine from F. The contract stipulated that the engine was to be 6in wor!ing order. The
engine wor!ed for 0 hours and then bro!e down. The :uestion was what the phrase 6in wor!ing order
meant. F argued that it meant that the engine had to wor! at the time of delivery and that he had,
therefore, not breached the contract.
%n order to determine the meaning of the phrase, the court loo!ed at the purpose of the contract.
F !new that ( had bought the engine to pump water from a borehole to three dams, and that it would
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ta!e appro<imately /0 hours to fill the dams. The phrase 6in wor!ing order therefore meant that the
engine had to be capable of wor!ing for that amount of time. F had therefore breached the contract.

Courts will also consider evidence of other surrounding circumstances, such as matters
probably present to the minds of the parties when they contracted, as well as the
conduct of the parties after conclusion of the contract.

Example 6.24
"ee In re Sopers Estate *9/- ',/0. 1$ ,23 'discussed above..
%f the court had used the unitary approach, they would also have considered the following surrounding
circumstances:
The fact that %ras partner was under the impression that %ra was legally married to 7ertrude.
The fact that %ras relationship with 4deline had clearly bro!en down completely 'to the e<tent that
he fa!ed his death and 6married someone else..
8n these facts, it would have been clear that neither %ra nor his partner intended 4deline to benefit from
the policy. Their intention was clearly to benefit 7ertrude. The word 6wife should therefore not be given
its ordinary grammatical meaning.

Evidence about what the parties said during negotiations may also be taken into account to
determine the meaning of the term.

4.2.$ %anons &ru'es( of interretation
Courts often use certain rules of interpretation to help determine the meaning of a contract.
Some of the most important rules are:

(a) Expressio unius est exclusio alterius
Literally this phrase means: the express mention of the one implies the exclusion of the
other. In other words, if the contract expressly refers to a specific matter, then by implication it
makes a contrary provision for the opposite case.

Example 6.25
4 contract stipulates that a lessee is responsible for maintenance of the inside of the leased premises.
The court will interpret the clause to mean that the tenant is not responsible for maintenance of the
outside of the premises.

(b) Eiusdem generis
Literally translated, eiusdem generis means of the same kind. The rule is also known as
noscitur a sociis (you will be known by the company you keep).
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The rule is used to find the meaning of general terms that are used together with words of
a more specific nature. A court will limit the wide ambit of the general word to matters similar to
the things covered by the more specific phrases.

Exercise 6.10
X and 5 agree that 5 will buy Xs crop of 6oranges, lemons, grapefruit etcetera at G- a !ilogram. 4 dispute
later arises whether Xs crop of peaches is included in the sale.
'a. 4re peaches included& $hy D why not&
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'b. $ould you come to a different conclusion if the phrase read: 6oranges, pears, etcetera&
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(c) Change of language
If parties first worded one clause in a particular way, and they subsequently worded a similar
clause differently, the courts assume that the change in wording indicates that the clauses should
be interpreted differently.

Example 6.26
Clause * of a contract refers to a document 6signed by a party or his agent. Clause , refers to a letter
6signed by a party.
The change of language in clause , indicates that the letter may not be signed by a partys agent.

(d) Construction favouring validity
If a phrase is capable of two meanings, one of which would lead to the contract being invalid, the
court will use the meaning that makes the contract valid.

(e) Contra proferentem
This rule states that a term will be interpreted against the party who was responsible for the
wording of the clause. The reasoning is that the drafter of a clause should have made sure that
the clause was clear and unambiguous. Previously under the staged approach to interpretation,
this rule was only used in the last resort, in other words when the meaning of the term still
remained unclear after all other considerations had been taken into account. It is unclear whether
this still applies, or whether the contra proferentem is merely weighed together with all other
factors.

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(f) Equitable construction
If it is not clear which party was responsible for the wording of the clause, the court will find the
fairest interpretation of the term, so that one party is not unreasonably advantaged above the
other. The court will also adopt an interpretation that causes the least inconvenience. As with
the contra proferentem rule, it is unclear whether this rule will only be used as a last resort, or
whether it will be weighed together with all the other factors.

Read Bruwer v Nova Risk Partners Ltd 2011 1! "# 2$4 %"&!.
Facts: ( too! out car insurance with 1. The contract contained , clauses obliging ( to disclose certain
information to 1.
Clause $. Claims
%f anything happens that could result in a claim you must immediately advise the Company as soon as you become aware
of any possible prosecution or in:uest.

Clause 6. Hisclosure
5ou must inform the Company of all facts that are material to the acceptance of the insurance or the premium that is
charged. %f you fail to do this, the Company may, at its option, declare this policy void. 4s this also applies during the
currency of this policy, any changes must be reported immediately. '%t is therefore important for you to disclose all
material facts that may be of relevance to the Company..

$hile he was insured, ( was involved in an accident and criminal prosecution was instituted
against him. ( notified 1 of the prosecution. #owever he did not notify 1 of the outcome of the
prosecution 9 namely that ( was convicted of negligent driving. '5ou may assume that the conviction was
a change occurring during the currency which was material to the acceptance of the insurance and the
premium that was charged..
4 few years later ( was involved in another accident. $hile investigating this accident 1 found out
about (s conviction for the previous accident. 1 argued that ( had breached his duties of disclosure in
terms of the contract by failing to notify 1 of his conviction.
'e(al issue: $as ( obliged to inform 1 of his conviction on a proper interpretation of the contract&
The court held that the contract was ambiguous in this regard. $hy&
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..
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$hich canons of construction did the court use to interpret the contract&
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C<plain how the court applied these canons to the facts of the case. $as ( obliged to disclose his
conviction for negligent driving& $hyDwhy not&
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Exercise 6.11
4 leases premises from ( for purposes of running a fish and chips ta!e?away business. The lease contains
the following clauses:
*. The premises are let for the purpose of running a fish and chips ta!e?away business, and the tenant '4. may not use it
for any other purposes.
*3. The tenant '4. may not ma!e any structural alterations to the premises without the consent of the landlord '(..
4 ma!es the following changes to the premises without the consent of the landlord:
Tiles are installed on the walls in the front part of the shop.
4utomatic water sprin!lers are installed in the ceiling to put out fires.
4 wooden partition is installed between the !itchen and the bathroom area.

( argues that these changes are 6structural changes, and that 4 breached the contract by failing to get
his permission before ma!ing them.
Ising the various canons of construction, interpret the phrase 6structural changes in the following
scenarios. +or each scenario, identify the appropriate canon of construction, and e<plain how it will be
applied.
'a. %n terms of health and safety regulations, it is illegal to rent out premises for business purposes unless
these changes are made to the premises.
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'b. The contract contained the following definition clause:
"tructural changes are any changes to the interior or e<terior of the shop, including an addition to the area or change in
height or the removal of part of building, or any change to the structure, such as the construction or removal or cutting
into of any wall or part of a wall, column, beam, Joist, floor including a meEEanine floor or other support, or a change to or
closing of any re:uired means of access, etcetera.
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'c. 4 obtained (s verbal consent to the changes before he made them. #owever, ( argues that the
consent must be in writing. The contract also contained the following clause:
*9. 4 may not sublet the premises without (s written consent.
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4.$ %u)u'ati*e effect
It is important to note that in terms of the unitary approach to interpretation, the court has to
consider the cumulative effect of all of the above factors. In other words, even if the literal
meaning of a term in the contract point towards a specific meaning, the effect of other factors
such as the surrounding circumstances could lead the court to interpret the contract differently.
However the interpretation of the term must reflect the intention of the parties as expressed
in the contract. Courts cannot use interpretation to change the wording of the contract merely
because that would be fair or reasonable in the circumstances.

'atal (o!nt )un!c!pal #ens!on *und v Endumen! )un!c!pal!ty ,)*, '2. "4 -9/ '"C4.
;$here more than one meaning is possible each possibility must be weighed in the light of all these
factors. The process is obJective, not subJective. 4 sensible meaning is to be preferred to one that leads to
insensible or unbusinessli!e results or undermines the apparent purpose of the document. Judges must
be alert to, and guard against, the temptation to substitute what they regard as reasonable, sensible or
businessli!e for the words actually used.>

If the court cannot determine the meaning of the term even after consideration of all
relevant factors, the term (and possibly the entire contract) will be void for vagueness.

Exercise 6.12
Gevise your understanding of the unitary approach to interpretation by answering the following :uestion:
4 concluded a contract for the insurance of his car, with ( insurers. The contract contains the following
terms:
*. 4 'the insured. underta!es to maintain the car in a roadworthy condition.
,. The vehicle will only be used for private, social or domestic purposes.
/. The following uses are specifically e<cluded: hiring to other parties, driving instruction for reward, racing, carriage of
passengers for hire or reward.
4t the time of the conclusion of the contract, the agent for ( insurers had told 4 that the car could
only be used for private purposes, li!e driving to wor! or to social occasions. 8n his way to wor!, 4 is
involved in an accident and suffered G,) ))) damage to his car. #owever, when 4 claimed compensation
from ( insurers, they indicated that driving to wor! was not covered under the policy. 4dvise 4.
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