Originally from The Law and Practice of International Arbitration: Essays in Honor of John Fellas – Preview Page

INTRODUCTION 

Although the United Kingdom and the United States share a common legal background, nearly 250 years of American independence has naturally led to divergences in their approach to contractual interpretation.  The scope and nature of those divergences are not always understood, even by sophisticated legal practitioners.  This essay is not meant to be comprehensive, but is intended to provide a comparative analysis of contract interpretation under English and New York law, on the following issues which are often relevant to international commercial arbitration disputes:2 

1. General interpretative principles under English and New York law: in particular, while both jurisdictions focus on the literal meaning of the words used in a contract, especially as between sophisticated parties, there is a distinction as to: (i) the extent to which extrinsic facts and circumstances may be taken into account; (ii) the treatment of ambiguity in contract language; and (iii) the consideration of commercial commonsense; 

2. The circumstances in which terms may be implied into contracts under English and New York law: while both jurisdictions are reluctant to imply terms into contracts, the applicable test for the implication of terms is different, as is the treatment of implied obligations of good faith; and 

3. The interpretation of certain standard clauses commonly found in commercial contracts under English and New York law:  in particular, clauses addressing (a) force majeure; (b) material breach; (c) best or reasonable efforts; and (d) limitation of liability.