Rules for Interpretation of Contracts: Importance of ‘Deleted Words’

Importance of ‘Deleted Words’

Initially, the idea was that the court shall look into what is present in the contract and not what has been deleted based on House of Lords judgment in A&J Inglis vs. John Buttery & Co. [(1878) 3 App. Cas. 552 (HL)]. In this case, a ship owner and a ship builder entered into a contract for making ship. Ship owner wanted the ship to be made in conformity with the Lloyd’s standard which required certain modifications to be made to the ship. It is remarkable to note that during the drafting of the contract, the term “but if any new plaiting is required, the same is to be paid for extra” was deleted from the contract. The Ship owner, therefore, contended that since these terms were deleted from the contract, he should not liable for the new plaiting. In this case, House of Lords held that the deleted words cannot be relevant in interpreting the contract and observed that ‘Deleted words cease to exist for all intent and purposes’ once it is removed. In this context, Lord Gordon noted-

“It is quite fixed, and no more wholesome or salutary rule relative to written contracts can be devised, that where parties agree to embody, and do actually embody, their contract in a formal written deed, then in determining what the contract really was and really meant a Court must look at the formal deed and to that deed alone.”

Similarly, Lord Blackburn also noted that deleted sentences, being part of prior negotiations, cannot be resorted for interpretation of a particular term of a contract as the formal contract supersedes all previous communications between the parties.

The position in Inglis v. Buttery was surprisingly untenable with the prevailing law at that time. Later in City and Westminster Properties (1934) vs. Mudd [[1959] Ch. 129 Ch D.] Harman J also noted “past history” or deleted words in previous drafts cannot be referred to interpret the terms of a contract. Another landmark judgment on this issue was Mottram Consultants Ltd. vs. Bernard Sunley & Sons Ltd.[1975] 2 Lloyd’s Rep.197. In this case  Lord Cross of Chelsea observed-

“When the parties use a printed form and delete parts of it one can, in my opinion pay regard to what has been deleted as part of the surrounding circumstances in the light of which one must construe what they have chosen to leave in.”

Adding to the importance of ‘deleted words’ in interpretation of contracts, the Court in Punjab National Bank vs. de Boinville [1992] 3 All ER 104, noted-

“. . if the parties to a concluded agreement subsequently agree in  express terms that some  words in it  are  to  be  replaced  by others, one  can have  regard  to  all aspects of the  subsequent agreement  in construing the  contract, including  the  deletions, even in  a  case  which is not, or not  wholly, concerned  with  a printed form.”

In India, M.A. Sassoon and Sons Limited vs. The International Banking Corporation, [1927 (29) BOMLR 1181] was probably the first case on interpretative value of the ‘deleted words’ from a contract. In this case deletion of certain words in the printed mercantile contract was in issue. The Calcutta Branch of Eastern Bank sent to M/s. Sassoon and Company a letter of advice, the relevant part of which is extracted below-

“We have pleasure in informing you, that we are prepared at our option as usual to make advances against and/or negotiate any bill or bills drawn in compliance with the terms of this letter.”

This letter of advice was on a printed form, and after the above words “of this letter,” the form proceeded as follows-

“it being understood that this is not a confirmed bank credit, and you are in no way released from the ordinary liability of drawers.”

These last words as extracted above “it being…of drawers,” were deleted and after the signature of the Eastern Bank of Calcutta there followed two more additions, viz.

  1. Please note that this authority is a confirmed credit.
  2. When offering drafts for negotiation under this authority, it is imperative that this letter be produced to enable the negotiating bank to note payments on the back hereof.

The Appellant contended that the deletion of the words in the form “you are in no way released from the ordinary liability of drawers” in combination with the added words, “this authority is a confirmed credit,” imports that “you are in some way released from that liability.”

The Court did not accept such argument of the Appellant observing that it is settled through good deal of authority that the effect of deleting words in printed form of mercantile contract is the same as if the deleted words had never formed part of the print at all. Therefore, the words which were expressly added were construed by the Court without the deleted words. This decision settled the issue once for all and since then we have hardly come across any case in which interpretative value of “deleted words” in a contract was elaborately discussed. However, unlike the Indian Position on this issue which was settled way back in 1927, today the common view in all the common law countries, like New Zealand, Australia, and UK is that ‘deleted words’ can be used to interpret contracts. Therefore, resort to ‘deleted words’ from a contract is still an unsafe guide to the interpretation of a contract in India.

Next Post: Documentary Tools for Interpretation of Contracts (coming soon)

Author: Vivek Kumar Verma

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