Interpretation of Agreement

2012 SCMR 1112 SUPREME-COURT Judicial Precedent

'Without prejudice' ruleScopeExceptionsNegotiations expressed to be 'without prejudice' to compromise dispute resulting in a settlement agreementEvidentiary valueDispute over interpretation/construction of terms of the settlement agreement

Facts/representations made during without prejudice negotiations admissible as evidence to aid interpretation/construction of the settlement agreement notwithstanding the without prejudice rule

Scope

Parties had entered into negotiations which were expressed to be 'without prejudice' to settle a dispute between them and subsequently entered into a written settlement agreement to compromise the dispute

Disagreement between the parties over the interpretation of the terms of the settlement agreement

Contention of the defendant (appellant) was that representations made during the 'without prejudice' negotiations could be relied upon as an aid to interpreting the settlement agreement between the parties

Validity

Evidence in support of representations made during 'without prejudice' negotiations was in principle admissible as part of the factual matrix or surrounding circumstances on the true construction of the settlement agreement

No reason existed, in circumstances, why the ordinary principles governing the interpretation of a settlement agreement should be any different regardless of whether the negotiations which led to it were without prejudice

Process of interpretation of the settlement agreement should in principle be the same, whether the negotiations were 'without prejudice' or not, as in both the cases the evidence is admitted in order to enable the court to make an objective assessment of the parties' intentions

Where a party to negotiations knew that, in the event of a dispute pertaining to what a settlement agreement meant, objective facts which emerged during the negotiations would be admitted in order to assist the court to interpret the said settlement agreement in accordance with the parties' true intentions; settlement was likely to be encouraged and not discouraged

Such an approach was the only way in which the modern principles of construction of contracts could be properly respected

Interpretation exception should be recognized as an exception to the 'without prejudice' rule but same did not mean that the importance of the said rule was to be underplayed or the exception was to be extended beyond the evidence which was admissible in order to explain the factual matrix or surrounding circumstances to the court

Appeal was allowed, accordingly.

2000 CLC 451 LAHORE-HIGH-COURT-LAHORE Judicial Precedent

Interpretation of Agreement While interpreting an agreement, it is necessary to see the intention of the parties as can be gathered from the circumstances leading to the agreement itself and the words of various clauses used therein