This was an appeal by ProForce Recruit Ltd against a decision of His Honour Justice Field striking out their breach of contract claim. ProForce ran an employment and recruitment agency.
Should the "preferred supplier status" term be given the meaning ProForce contended?
It was arguable that the words bore the meaning that the negotiating parties had given them in their communications leading up to the signing of the agreement and therefore the claim should not have been struck out.
The term "preferred supplier status" was not defined by the parties in the agreement and was not the subject of large amounts of judicial consideration. As the term "preferred supplier status" did not have an obvious and natural meaning, the meaning could only be properly determined in the context of the agreement read as a whole taking into account the surrounding circumstances.
Lord Justice Mummery was of the view that evidence of the facts about which the parties were negotiating was admissible to explain what meaning was intended. In addition, evidence of what the parties said in negotiations was admissible to show that the parties negotiated on an agreed basis that the words used bore a particular meaning.
*Full case details
ProForce Recruit Ltd vs Rugby Group Ltd, 17 February 2006, Court of Appeal, Mummery LJ, Arden LJ, Richards LJ
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Lord Justice Mummery was of the opinion that pre-contractual negotiations could be used to interpret the meaning of a provision in a contract. However, as this point was not central to the decision it is not binding.
Generally, courts may admit evidence as to communications between the parties prior to the making of a written contract when for example, parties make their agreement partly in writing and partly orally, where there are proceedings for rectification or if it has been alleged that one party made a representation to the other party upon which it acts.
As pre-contract negotiations are not always admissible to interpret the meaning of contractual clauses, it is important for parties to a contract to ensure that they record all terms accurately in their contract and use phrases that have obvious and natural meanings so that they can be easily interpreted.