In an important development of the law of interpretation of contracts, the Constitutional Court held in July 2017 that where ordinary laypeople use ordinary words in a contract, their understanding of the meaning of the words used must not be overridden by a lawyer’s understanding based on their knowledge of legal principles not familiar to non-lawyers.
The parties extended a lease by writing across the face of the lease the words ‘Extend till 31/5/2014 monthly rent R5 500’. The lease included a right of pre-emption giving the lessee the right of first refusal to buy the property if sold by the lessor during the period of the lease.
Legal principles from our case law suggest that an extension of a lease does not extend terms that are ‘collateral and not incident to’ the lease such as a right of pre-emption.
Ordinary laypeople who are not aware of the distinction between collateral and incidental provisions would, when they write the word ‘extended’ on the face of the document containing the terms of the lease and the right of pre-emption, mean to extend not only the lease but everything in the document.
The relevant circumstances included the fact that the extension was agreed between laypersons.
Agreements are interpreted by looking at the words in the context of the document as a whole and in the light of all relevant circumstances. The relevant circumstances included the fact that the extension was agreed between laypersons whose intention was to extend the whole agreement. If a term or terms are not meant to be extended that must be made plain.
The court held that the right of pre-emption had also been extended.
This principle will not usually apply to legalese which has a specific legal meaning or to lawyer-negotiated agreements. The decision reflects an important development in the law of interpretation of contract according to the ordinary understanding of non-lawyers in appropriate circumstances.
