A study on the principles of Interpretation under the Contract Law of Bangladesh

While studying law, students might find difficulties to connect the rules, principles, and maxims related to interpretation of statute with real life application, such as contract law. This journal contains brief discussion on interpretation of statute application in contract law of Bangladesh.

Interpretation of contracts is the essence of fairness in disputes arising out of the Contract Act, 1872, that governs the law of contract in Bangladesh. Every contract contains some terms that are either ambiguous or vague or susceptible to more than a single meaning. The courts then fall back upon certain well-defined principles of law, maxims, and rules to ascertain the real intention of the parties and give full effect to their agreements.

The literal rule, golden rule, and mischief rule are some of the key principles guiding the courts in interpreting the terms of a contract. Legal maxims like “Ut Res Magis Valeat Quam Pereat” also exist to ensure that agreements are not rendered void on account of minor ambiguities. Judicial precedents further refine the application of these principles.

The present study is going to focus on the principles of interpretation, their application in Bangladeshi courts, and their importance in promoting fairness and legal certainty in contract law.

Principle

In Bangladesh, the interpretation of contracts is guided by principles established under the Contract Act, 1872, and judicial precedents. These principles aim to ascertain the true intent of the contracting parties and ensure fair enforcement of contractual obligations. Below are key principles of contract interpretation, accompanied by examples and relevant case references:

1. Literal Interpretation:

Principle: The words of a contract are given their plain, ordinary meaning unless such an interpretation leads to ambiguity or absurdity.

Example: If a contract stipulates delivery of goods on a specific date, the term “delivery” is understood in its common sense unless the contract defines it otherwise.

Case Reference: In Superintendent Engineer, RHD Sylhet & others vs. Md. Eunus and Brothers (Pvt.) Ltd & others[2009], the court emphasized that the terms of a contract should be interpreted based on their clear and unambiguous language

2. Harmonious Construction:

Principle: The contract should be read as a whole, and its clauses interpreted in a manner that harmonizes any apparent inconsistencies.

Example: If one clause grants a right and another imposes a restriction, both should be interpreted to give effect to the parties’ overall intent without nullifying either provision.

Case Reference: In Bangladesh Power Development Board and others vs. Asaduzzaman Sikder, the court held that contractual terms must be construed to uphold the contract’s overall purpose and avoid contradictions.

2. Intention of the Parties:

Principle: Courts strive to ascertain the parties’ intentions at the time of contract formation, considering the contract’s language and surrounding circumstances.

Example: If a contract uses technical terms specific to an industry, the court may consider industry practices to determine the parties’ intent.

Case Reference: In Kerala State Electricity Board and others vs. Kurien E. Kalathil and others, the Indian Supreme Court, whose decisions are persuasive in Bangladesh, stated that the meaning of a contract should be determined by the parties’ intentions, especially in technical matters.

3.Reasonableness and Fairness:

Principle: Interpretations leading to unreasonable or unjust outcomes are avoided; contracts are construed to promote fair and equitable results.

Example: A clause imposing an exorbitant penalty for a minor breach may be interpreted in a manner that aligns with principles of fairness.

Case Reference: In Union of India vs. J.N. Sinha, the court noted that principles of natural justice and fairness are integral to contract enforcement.

Maxims

“Ejusdem Generis”

Principle: When general words follow specific words in a list, the general words are interpreted to include only items of the same type as the specific words.

Example: In a contract clause stating that the tenant is responsible for “water, gas, electricity, and other utilities,” the term “other utilities” would be interpreted to include utilities similar to water, gas, and electricity.

Case Reference: While specific Bangladeshi cases may not be readily available, this principle is commonly applied in contract interpretation within common law jurisdictions.

“Contra Proferentem”

Principle: Any ambiguity in a contract is construed against the party that drafted it.

Example: If a contract prepared by a seller contains an ambiguous term regarding warranty coverage, the ambiguity may be interpreted in favor of the buyer.

Case Reference: In Bangladesh Power Development Board and others vs. Asaduzzaman Sikder, the court held that contractual terms must be construed to uphold the contract’s overall purpose and avoid contradictions.

“Assentio Mentium”

means “meeting of the minds.” In the context of contract law, it signifies that a valid contract requires mutual agreement and understanding between the parties on the essential terms.

Example:

If one party agrees to sell “100 tons of steel” and the other party believes the agreement is for “100 tons of stainless steel,” there is no meeting of the minds, and the contract may not be enforceab

Karim & Sons Ltd. Vs. Bangladesh Bank (1992)

In this case, the court emphasized the importance of a clear mutual agreement between parties for a valid contract. Ambiguities in the terms led to a ruling that there was no true meeting of the minds.

Case:

Superintendent Engineer, Roads and Highways Department (RHD), Sylhet, and others vs. Md. Eunus and Brothers (Pvt.) Ltd. And others, 16 BLC (AD) 73 (2009).

Issue: Whether a writ petition is maintainable for disputes arising from an ordinary commercial contract with the government, especially when such disputes involve contested facts.

Rule: Ubi jus ibi remedium”: Meaning “where there is a right, there is a remedy.” The court noted that while the petitioner may have a legitimate grievance, the appropriate remedy lies in a civil suit, not a writ petition.

Application:

Bangladesh Power Development Board (BPDB) and others vs. Md. Asaduzzaman Sikder, reported in 9 BLC (AD) 63 (2003)

Issue: The primary …. whether a writ petition is maintainable for resolving disputes stemming from an ordinary commercial contract with a government entity

Rule:

2. “Ubi jus ibi remedium”: Meaning “where there is a right, there is a remedy.” The court noted that while the petitioner may have a legitimate grievance, the appropriate remedy lies in a civil suit, not a writ petition.

Application: Md. Asaduzzaman Sikder entered into a contract with the Bangladesh Power Development Board (BPDB) for certain services. Disputes emerged regarding the execution and obligations under this contract, prompting Sikder to file a writ petition seeking judicial intervention.

In another case,

“Superintendent Engineer, Roads and Highways Department (RHD), Sylhet, and others vs. Md. Eunus and Brothers (Pvt.) Ltd. And others

Reference: 16 BLC (AD) 73 (2009)”

Facts:

The Roads and Highways Department (RHD), Sylhet, entered into a commercial contract with Md. Eunus and Brothers (Pvt.) Ltd. Disputes arose regarding the execution of the contract. Md. Eunus and Brothers filed a writ petition, seeking relief against the government department.

Issue:

The key legal question was whether a writ petition was maintainable to address disputes arising from an ordinary commercial contract with a government entity, especially when the disputes involved contested facts.

A writ petition is not maintainable for resolving disputes related to ordinary commercial contracts.

Such disputes do not involve statutory obligations or fundamental rights; hence, they must be resolved through civil suits where evidence can be examined thoroughly.

Also, the writ jurisdiction is reserved for cases involving public law issues, not private commercial matters.

The court dismissed the writ petition, directing the petitioner to pursue a civil suit to address the contractual disputes. This judgment reaffirmed that private contract disputes, even with government entities, should be resolved through appropriate civil court procedures, not writ jurisdiction.

Beyond going through the above mention discussion, it can be said that, principles of interpretation under the Contract Law of Bangladesh play an important role in the maintenance of equity and justice while settling disputes arising between parties to a contract. By basing the decision on established rules, maxims, and precedents set by courts, the judiciary tries to uphold the interest of the contracting parties to prevent any unfair dealing. Such principles bring out the clarity of ambiguous terms and also maintain the balance between the rights and obligations of parties.

In Bangladesh, the application of principles like the literal rule, golden rule, and mischief rule, along with legal maxims, makes the interpretation of contracts consistent and reasonable. These tools help maintain trust in legal agreements and promote confidence in the justice system.

Such principles will facilitate lawyers, companies, and individuals in mitigating disputes and complying with the law. Fundamentally, the interpretation principles direct the rule of law toward a justified and stable contractual environment in Bangladesh.