A High Court case concerning an agreement to supply cupcakes has underlined the legal principle that contracts are generally taken to mean what they say and that extrinsic evidence cannot normally be used to assist in their interpretation.
The dispute started with a simple contract for one company to manufacture and supply cupcakes to another company. The former argued that the contract precluded the latter from making cupcakes of its own and required it to place minimum annual orders worth £600,000.
When the second company did not adhere to these stipulations, the manufacturer sued its client, alleging breach of contract.
In striking out the company's breach of contract claim, however, the Court noted that its interpretation of the agreement involved adding words which were not there and would do 'extreme violence' to the natural and ordinary meaning of the wording in fact employed.
There was nothing ambiguous about the agreement and it was thus impermissible to take into account extraneous evidence regarding the parties' alleged intentions. The Court could detect no mistake in the drafting of the contract and it was not possible to argue that it did not make commercial common sense.
For advice on the negotiation or interpretation of any contract, please contact Roy Colaba on 0121 698 2200 or email r.colaba@sydneymitchell.co.uk
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