The Relationship Between The Dutch Haviltex Case And The English Hsbc Bank Plc V. Liberty Mutual Insurance Company (Uk) Ltd Case

The relationship between the Dutch Haviltex case and the English HSBC Bank plc v. Liberty Mutual Insurance Company (UK) Ltd case

Sometimes disputes arise between parties on the interpretation of certain contractual provisions . When such a dispute comes before a court, the judge will have to construe the contract (and the parties' intentions).

In the Haviltex case , the Dutch Supreme Court developed the so-called Haviltex-formula in order to decide on the content and meaning of agreements. The formula constitutes that courts should pay attention to what parties could reasonably expect of one another and to the meaning they could reasonably attribute to a certain part of the agreement .

In the English HSBC Bank v. Liberty Mutual Insurance Company case , the House of Lords also had to construe the meaning of a contractual provision . Rix LJ held that the meaning of a provision will be construed by answering the question what the language used would convey to the reasonable man. The judge should give the language in question its "natural and ordinary meaning", unless "the reasonable man would conclude that something has gone wrong in expressing the parties' intentions" .

The US Fairfield 274-278 Clarendon Trust v. Dwek case

The US Fairfield case also relates to the construction of contracts. In this case the United States Court of Appeals, First Circuit, reasoned that under Massachusetts law the interpretation of a contract only presents an issue of fact for a jury if the contract is ambiguous. If the contract is unambiguous, it should be enforced according to its terms.

An agreement is presumed to express the intent of parties (except in the case of fraud or mistake), so parties are bound by the plain terms of the contract .

Conclusion

One could argue that the US approach is the strictest, parties are in principle bound by the plain language of the contractual terms. This is similar to the English approach, except for its correction of the result by the reasonable man test. The Dutch method provides the court with the biggest discretionary powers.

references/footnotes:

Such disputes sometimes also arise when certain situations have not been included in the contract, e.g. because the drafters might have overlooked those issues.

Ermes/Haviltex, HR (Dutch Supreme Court) 13 March 1981, NJ 1981/635.

According to the Haviltex case, a court should, when deciding on that question, also take account of the social classes parties