Purposive interpretation of contract

Rainy Sky SA v Kookmin Bank [2011] UKSC 50.

Here, a dispute over the meaning of the words "all such sums" went High Court, Court of Appeal and to the Supreme Court. The bank gave a guarantee to a purchaser of a ship being built. The builder ceased trading so no ship. The customer turned to the bank under the bond for recovery of the sums already paid to the builder.

The obligation on the bank was capable of more than one interpretation - was it to apply if the builder becomes insolvent, even where there is no mention of insolvency in the clause?

The Supreme Court applied the purpose or purposive rule and came out in favour of the customer. The courts will do this where more than one interpetation is possible and will not assist a clause which has one meaning only even if apparently contrary to the purpose of it. So a badly drafted clause capable of only one meaning will be construed literally!

Go back

Subscribe to our RSS feed