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Lloyd's Maritime and Commercial Law Quarterly

THE CONSTRUCTION OF SHIPPING AND MARINE INSURANCE CONTRACTS: WHY IS IT SO DIFFICULT?

Sir Bernard Eder*

This lecture considers the inherent difficulties with the construction of commercial contracts and, in particular, shipping and marine insurance contracts. Some of the roots of this difficulty are identified, including the use of inappropriate standard forms and the elusive nature of the “ordinary and natural meaning” of words. The lecture comments on the abandonment of a literalist approach to construction and the problems associated with the modern approach, including reference to “factual matrix” and the ambivalence of “commercial common sense”. It is argued that, principally, construction is best undertaken by reference to the words used by the parties themselves and the long-established principles of construction.
My focus in this lecture is the construction of shipping and marine insurance contracts. That was, of course, the focus of Donald O’May’s work—and probably is the staple diet of many of you here this evening. However, there is, in truth, nothing special about these contracts. And, if there are any generalists in the audience, much of what I have to say applies equally to most, if not all, commercial contracts.
Let me acknowledge at the outset the vast amount of academic learning that has been produced in recent years on the general topic of the construction of commercial contracts. Quite apart from what appears in Chitty 1 and the other standard textbooks on contract, there is, of course, Sir Kim Lewison’s book The Interpretation of Contracts,2 now in its 5th edition, weighing in at 862 pages and even more expensive than Scrutton on Charterparties;3 Richard Calnan’s Principles of Contractual Interpretation;4 John Carter’s The Construction of Commercial Contracts 5—another magnum opus, extending to some 716 pages; and a deluge of learned articles, including a trilogy by Johan Steyn (“The Role of Good Faith and Fair Dealing in Contract Law: A Hair-Shirt Philosophy?”,6 “Does Legal Formalism Hold Sway in England?”7 and “Contract Law: Fulfilling the


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