In Wood v Capita Insurance Services Ltd [2017] UKSC 24, the Supreme Court restated — and, for practical purposes, settled — the modern English approach to commercial contract interpretation. Textualism and contextualism are not rival camps. They are tools used in a single iterative exercise: the court ascertains the objective meaning of the language the parties have chosen, read in its documentary, factual, and commercial context.
What the Court actually held
Lord Hodge’s judgment is careful not to invent a new test. It synthesises Rainy Sky SA v Kookmin Bank [2011] UKSC 50 and Arnold v Britton [2015] UKSC 36. Where language is unambiguous, it is given its natural meaning even if the result seems hard. Where language admits of more than one meaning, the court prefers the construction consistent with business common sense. The poorer the drafting, the more the court will lean on context; the clearer the drafting, the less room there is for commercial intuition to rewrite it.
For practitioners, the operational point is simpler than the academic debate that preceded it. You cannot rely on a court to rescue a bad bargain dressed up as “context.” You also cannot rely on a court to enforce a linguistic absurdity merely because the words, isolated from the rest of the instrument, appear to say it.
How we draft under Wood
At Greer, Vane & Thorold we treat Wood as a drafting discipline, not merely a litigation principle:
- Defined terms do real work. If a definition is ornamental, delete it. If it is load-bearing, test it against every operative clause that uses it.
- Operative order matters. Hierarchy clauses, entire-agreement provisions, and schedules must not contradict the body without an express ranking rule.
- Examples are dangerous. “Including without limitation” lists that cut against the general words will be read; they will not always be read as the drafter hoped.
- Commercial purpose should be stated where it is not obvious. A short recitals section, used carefully, still helps when the deal structure is non-standard.
A recent application
In a 2024 completion-accounts dispute we conducted, the buyer relied on a literal reading of “Net Working Capital” that excluded a category of accrued revenue the seller had always treated as current. The definition, read alone, favoured the buyer. Read against the accounts policies schedule, the expert-determination mechanics, and the way both parties had priced the locked-box walk from signing, the seller’s construction was the only one that produced a coherent instrument. The expert adopted it. Wood does not require a court (or an expert) to prefer the harsher reading; it requires the reading that the document, as a whole, objectively supports.
Practical takeaway
If you are negotiating a clause you expect to litigate, write it so that the “natural meaning” and the “commercial purpose” are the same sentence. If they diverge on the page, they will diverge in the judgment. That is not a failure of the court. It is a failure of the draft.
This note is for general information only. It is not legal advice and should not be relied upon as such. For advice on a specific matter, please contact the firm.