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Exclusionary principles

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                                                                                                                    SRN: 229113   In Investor Compensation Scheme Ltd v West Bromwich Building Society, Lord Hoffman set out the modern approach to interpretation contract within five principles, drawing a great deal of influences from Lord Wilberforce judgment in the case of Prenn V Simmonds (1). The third principle is the exclusionary rule:   �The law excludes from the admissible background the previous negotiations of the parties and their declarations of subjective intent. They are admissible only in an action for rectification. The law makes this distinction for reasons of practical policy and, in this respect only, legal interpretation differs from the way we would interpret utterances in ordinary life. The boundaries of this exception are in some respects unclear. But this is not the occasion on which to explore them.� This rule is a long standing principle in English law, which states that evidence of prior negotiations between the parties cannot be admitted when the courts look into interpretation of the meaning of a contract.  The rule is controversial and for which the debate requires a �gentle stir�. In the case of Chartbrook v Persimmon Homes Limited, the House of Lord was invited to reconsider exclusionary rule applicability in the �interest of greater clarity and fairness� (2). ...read more.


Lord Hoffman�s opinion is that the removal of the rule will undermine the predictability and certainty in contract law. The issue of accepting facts know to both parties can be distinguished from those statements made during the course of pre-negotiations on the basis of subjectivity. In the former, there is no issue of subjectivity as the facts are objectively accepted by both parties.  In the latter, the statements are soaked in subjectivity. Therefore, abandoning the exclusionary rule is in one sense abandoning the objective theory upon which English contract is founded . Another reason that has been employed to justify exclusionary rule is that idea that in the absence of such a rule, would lead to manipulation in the form of  �paper trail of self serving documents�  by negotiators. Consequences of which would be undesired by all parties involved: increase litigation fees. (8) Lord Hoffman has highlighted that �safety devices� of rectification and estoppel by convention could be utilised to prevent injustices being suffered by parties due to exclusionary principles. The fact that these devices have to be pleaded and established to have effect means that there will be conformity and predictability  in the manner in which situations in which  injustices may occur will be dealt.   (7) Masood Ahmed 'Arbitration Clauses: Fairness Justice and Commercial Certainty' (2010) Arbitration International, Vol 26 (3) 409-419. (9) Chartbrook Limited v Persimmon Homes Limited [20081 EWCA Civ 183 at Ill.                                                                   ...read more.


(15) Excelsior Group V Yorkshire Television [2009] EWHC 1751 (Comm) (16) Masood Ahmed, The interpretation of commercial contracts: time for reform 21 21 Nottingham L.J. 26 2012. (17) Richard Buxton, "'Construction" and the Rectification after Chartbrook' (2010) CLJ 69(2), 253-262..                                                                                                             SRN: 229113 One justification for exclusionary rule is on the basis that admission of pre- contractual negotiations would result in uncertainty of outcome. One may argue that uncertainty in the law and to the parties exist in the present form of the rules. This is clearly illustrated by Baroness Hale�s: But I have to confess that I would not have found it quite so easy to reach this conclusion had we not been made aware of the agreement which the parties had reached on this aspect of their bargaining during the negotiations which led to the formal contract. On any objective view, this made the matter crystal clear. This, to me, increased the attractions of accepting counsel's eloquent invitation to reconsider the rule in Prenn v Simmonds [1971] From the confession of Baroness Hale, it can clearly be inferred that reform of exclusionary principle is a must, to enable the court to be flexible in approaching the issue of assessing the relevance and strength of evidence prior to negotiations. ...read more.

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