27 March 2009

Veritable Necker Cube

How do you see the cube? Does it go back into the page from a face on the left, or does it go back and down from the face on the right? Our brains try to construct a cube from the information available; the information gives our brain these two competing hypotheses which we construct and then flip between them.

This must have been what Mr Peter Prescott QC was thinking about in, Oxonica Energy Ltd v Neuftec Ltd [2008] EWHC 2127 (Pat) when he described a poorly drafted commercial agreement, "[t]hose who draft intellectual property licences may learn something from the misfortune that has befallen the parties to this case. They have entered into a licence agreement that contains a crucial phrase which is exceedingly hard to interpret. I have changed my mind several times about its meaning – it is a veritable Necker cube of licence agreements."

The case is worth reading simply for the well written prose.

After that there are useful points about the interpretation of contracts, eg, "... it does not matter what a party thought an agreement meant when he signed it. Nor does it matter what he was negotiating to get. What matters is what the document would convey to a neutral and reasonable person. But no document, nor any other statement made by human beings for that matter, can properly be understood except in its context." If you are going to take away anything from reading this case, take this one point. I say that because from my experience of business this is the one point that is not understood by lay people. Contracts are cribbed together by executives within companies based upon half understood contracts that have been provided by other business who they've had dealings along with their misunderstandings of the law. This is usually how these sorts of contracts and subsequent litigation are born.

What would flabbergast this sort of thinking appears a bit later in the case when our attention is drawn to what Lord Hoffman said in Mannai Investment Co Ltd v. Eagle Star Assurance (see Oxonica for links to Bailii),

"[the] ancient fallacy which assumes that descriptions and proper names can
somehow inherently refer to people or things. In fact, of course, words do not
in themselves refer to anything; it is people who use words to refer to things.

Going on to say,

"a failure to distinguish between the meanings of words and the question of what would be understood as the meaning of a person who uses words. The meaning of words [as found in dictionaries and grammars] is part of the material which we use to understand a speaker's utterance. But it is only a part; another part is our knowledge of the background against which the utterance was made. It is that background which enables us, not only to choose the intended meaning … but … to understand a speaker's meaning, often without ambiguity, when he has used the wrong words."

The case goes into greater details regarding the interpretation of contracts using as an example what one would make of Mrs Malaprop.

A must read.

(One last point, the case appeared a number of months ago but I didn't think that the blog would be complete without it. Realising that I don't have any readers, I'm using this space as an open notepad.)

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