The leading case on contractual interpretation is the 2012 Supreme Court of Appeal decision in Natal Joint Municipal Pension Fund v Endumeni Municipality. This confirmed that interpretation is one unitary, holistic exercise, starting with the words used but taking into account the background context available to both parties and having regard to other relevant factors, such as business common sense.
Significantly, post-contract conduct is given weight in South Africa as a matter of the parties’ presumed intention. This can affect the interpretation of ambiguous scope – where, for example, the parties have acted in a particular way, post contract, which lends support for one interpretation of the scope over another.
Where there is a contractually permitted variation, the contract rules as to measurement are followed in the first instance. This usually required the application of the existing contract rates or local methods of measurement, such as South African National Standards (SANS). If the variation is not permitted by the contract then there may also be a claim under the common law for damages for breach of contract, if such claims are preserved by the contract. Note that, in public contracting, variations above 20% of the original contract value (or R20m if lower) require treasury approval, failing which the variation must be tendered as a new contract.
Approaching changes in the Middle East
In the Middle Eastern jurisdictions, the rule on interpretation is that the contract is given its literal meaning unless there is an ambiguity. If there is an ambiguity, the parties’ intention is given consideration. Intention is considered in the context of the nature of the transaction, equity and trust and integrity that must exist between the contracting parties in accordance with custom. The concept of good faith is particularly relevant in the Middle East, and the parties’ conduct is often quite persuasive to judges and tribunals.