We review a lot of commercial contracts. And they often contain provisions which do not reflect the deal one or both of the parties thought they had reached.

The High Court has reminded businesses not to take contracts for granted: they mean what they say, not what businesses want to make them say!

In Western Export Services Inc v Jireh International Pty Ltd [2011] HCA 45 the High Court published a short but emphatic judgment rejecting an application for special leave to appeal a NSW Court of Appeal judgment which rejected the right of one party to introduce evidence of surrounding circumstances to interpret the contract.

The dispute concerned the construction of one clause of a short “Letter of Agreement” concerning the franchising in Australia of Gloria Jean’s Gourmet Coffee Stores and the calculation of a commission to be paid for the supply of branded coffees, teas and other products.

The issue was whether that commission was payable not only on sales made to GJGC Stores by the supplier Jireh itself but also on sales by two companies associated with Jireh that commenced to supply those stores subsequent to the original agreement.

The end result was that as the clause only required payment of commission for supplies by Jireh, no commission was payable on sales by associated companies. There was no ambiguity and therefore no reason to take evidence as to what the parties intended.

The High Court endorsed the decision of Judge Macfarlan in the NSW Court of Appeal:

In my view the provision is unambiguous and there is no basis for departing from its literal meaning. In particular the provision would not have an absurd operation if construed literally. I do not agree with the primary judge’s apparent conclusion that it is permissible to depart from the literal meaning of an unambiguous provision in order to give it what the Court considers to be “a commercial and business-like operation”.