Home > Business > Court Clarifies How To Interpret Commercial Contracts In Dispute

Court Clarifies How To Interpret Commercial Contracts In Dispute

Businesses will benefit from a clear summary of the rules the court will apply when interpreting commercial contracts in the event of a dispute, following a recent ruling in Scotland.

A local authority alleged breach of contract following issues about the quality and servicing of vehicles leased from a supplier company. In deciding the dispute the court gave useful guidance on the principles to be applied when interpreting a commercial contract:

• the aim of the court in construing a commercial contract is to ascertain objectively the aim of the parties;
• for this purpose, the court must put itself in the position of a reasonable person in possession of all background information reasonably available to the parties at the time the contract was entered into;
• when unambiguous language has been used in a contract, the court will normally give effect to that language;
• when there are two possible interpretations, the court will prefer that which makes the most commercial sense.

These principles show that the courts will try to give words in a contract their natural meaning, whether commercially sensible or not but, if words are ambiguous, it will then look to commercial common sense to work out what the parties intended them to mean.


Parties negotiating contracts should ensure contract clauses clearly and unambiguously say exactly what the parties intend at the time. If in doubt, take specialist legal advice.

Case ref: Allied Vehicles Limited v Glasgow City Council [2013] CSOH 192

Posted by:

Alex Cook

Request a Call Back

People frequently tell us that we’re approachable and offer great advice.

They also tell us most solicitors are hard to get hold of whereas we’re happy to listen. The reason for this is that we value long term relationships and we’re happy to speak with business people, to invest our time in understanding your business and whatever your concerns are. Only at that point can we understand whether we’re the right people to help you.

Related Blogs: