Interpretation of Contract in Investors Compensation Scheme Ltd V West Bromwich Building Society

This report discusses the interpretation of contract in the case of Investors Compensation Scheme Ltd V West Bromwich Building Society. It examines the issues, rules, and application of contract law in the case, as well as the relevant acts and schemes. The report concludes with the importance of fair interpretation in resolving disputes.

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Table of Contents
INTRODUCTION...........................................................................................................................3
ISSUE..............................................................................................................................................3
RULES.............................................................................................................................................3
APPLICATION...............................................................................................................................6
CONCLUSION ...............................................................................................................................8
CONCLUSION................................................................................................................................8

INTRODUCTION
Contract law indicates such law which is mainly design to secure the right of the parties
which are entering into the contract regarding dealing in any such activity. Usually contract is
binding by the terms of the government and also the parties are bounded to work according to the
set instructions which they mentioned under the agreement. As all agreement are the contract but
all contract is not agreement1. In respect of matters related to the principle of the interpretation of
the contract, it is mainly examined in relation to examining the intention of the parties regarding
attaining the particular activity. This report is based upon the case study relating to the Investors
Compensation Scheme Ltd V west Bromwich building Society [1998] 1 WLR 896. In this study,
the facts are identified regarding changes in interpretation of contract since the house of lord’s
decision are interpreted in this case study.
ISSUE
As stated in case study, the issues raised against compensation which is suffered by the
investors regarding investing in the Home Income plans. As the case is relevant to the matters
which is related to the negligence or misrepresenting regarding financing in particular task which
is against the norms mentioned under the contract act. As the case is between the Investors which
are misguided by their solicitors, other investment planner or financial advisors regarding
investing in particular plan which results in giving more benefits to them. After investing in
particular project, it results in facing crises regarding getting decrease in prices and stock prices.
As Investors compensation scheme (ICS) later make the statement that the person who are
applying for claim under their act are not liable to get mortgages once they claim for the losses
incurred. After attaining the money, they cannot claim for the mortgage property. Thus, in such
manner the principal of the contractual interpretation is examined regarding not taking
appropriate decision regarding applying the principal of the interpretation under the contract act.
RULES
Interpretation of the contract:
1 Mason, L., 2018. A Continuity of Confusion Rather than a Helpful Synthesis: The UK
Supreme Court’s Failure to Clarify the Correct Approach to Contract Interpretation. Business
Law Review. 39(1). pp.25-26.

Under the interpretation of contract, it mainly stated that the court interpreters the contract
made between the parties in relation to dealing in any such activity. Before undertaking any
judgement, they examine the intent of the parties regarding attaining the particular task which
helps parties to take right decisions2. Usually to resolve such matters, courts appoint the
reasonable person who is undertaking the complete Knowledge in every filed to resolve and
provide judgement in better way. The main reason behind performing in this role is that to
provide fair decision to the parties which are facing conflict in getting the right decisions. Thus,
it indicates the 5 major principles in interpreting the contract as:
 If the document is presenting to such person which is appointed by court, that accurate
information is presented.
 The background reflects the matrix of facts which means the accurate languages in used
which is clearly understandable and interpreted to identify the facts.
 The matters related to things and situation which is except the prior negotiations. As
court cannot negotiate the matters without verifying the actual matters which is
undertaking in contract3.
 The words which is used in contract but not be related to the dictionary meaning as it is
such meaning which is related to the context.
 The meaning not carried the wider points, it must carry the sense regarding imposing
such word in contract4.
This is explained with the case study of the Rainy Sky SA V Kookmin Bank, in this case,
the issues are examined regarding not carrying clear ambiguous regarding the terms through
which both the parties enter into the contract5.
2 Heidemann, M. and Lee, J., 2018. ˜ Theœ Future of the Commercial Contract in
Scholarship and Law Reform: European and Comparative Perspectives. Springer.
3 Mitchell, C., 2018. Interpretation of contracts. Routledge-Cavendish.
4 Rutgers, J. W., 2016. European contract law and social justice. In Research Handbook
on EU Consumer and Contract Law. Edward Elgar Publishing.
5 Case Comment: Rainy Sky S.A. & Ors v Kookmin Bank [2011] UKSC 50. 2020. Online.
Available through: < http://ukscblog.com/rainy-sky-s-a-and-others-appellants-v-kookmin-bank-
respondent-2011-uksc-50/>.

Misrepresentation act, 1967:
Under this act, the parties must carry the liability to file claims under this Act if they feel
that their rights are violated or misguided to attain any particular task. Misrepresentation mainly
indicates the matters related to the fraud, negligence or mistaken which is either committed
intentionally or not in view to commit such things6. Misrepresentation can be done on the bases
of the not providing accurate data or the facts which is the rights of the parties to be familiar
with facts and information7. If any person had been convicted regarding committing any such
illegal activity which occurs under misrepresentation, then such person convicted for the terms
of fine of $10,00. The terms are imposed in respect of nature of crime committed in terms of
laws.
Financial services act, 1986:
In this act the services which are relating to the financial control are managed under this act.
Under section 54 of the FSA, 1986 it is stated that the parties must attain the appropriate
investment strategy so that they not suffer losses in any of the activity. As company specially
appoint the financial officer who guided the investors and other stakeholder of the company
regarding the management criteria to invest money in the company8. Thus, in such manner they
secure the right of their investment by investing in particular project which helps in gaining
longer term gains.
Financial service Compensation scheme (FSCS):
This refers to the UK statutory scheme which is mainly related to the investors and
insurance compensation scheme designed for customers. It indicates that if the company not able
to pay penalties or amount for the losses incurred to investors, then they are liable to get
compensation under the FSCS act, which helps in fulfilling their needs and also losses which
they faced in attaining the particular task9. It is examined that around £85,000 cost is managed
per individual in respect of securing money from the losses.
6 Davies, P. S., 2018. Contract Formation and Implied Terms. The Cambridge Law
Journal. 77(1). pp.22-25.
7 Hutchison, A., 2017. Relational theory, context and commercial common sense: views
on contract interpretation and adjudication. South African Law Journal. 134(2). pp.296-326.
8 Sherwood, C. P., 2017. The Contract of Employment: Judicial vs Parliamentary
Reform. Kent Student Law Review, 3.

It is decided with the case study of the Prenn V Simmonds [1971] 1 W. L. R. 1381, this case
states that the rule or principal of the interpretation of the contract agreement is to be followed.
As in this case, the holding comp any is taking over the trading company and also binding the
staff through the contract regarding fulfilling the following terms. The terms in contract stated
that the employee buy back the shares but the condition is stipulated that the employees will
enjoy the benefits in condition of the having accumulated profits which is exceeding minimum
amount within the stipulated date10. After few times, company not manage the profits within the
stipulated date but earn the minimum profits in the said stipulated period. Thus, it indicates that
the holding company must be bound to follow the terms which they promise to employee to fulfil
it within the stipulated conditions. The employees are entered into the contact by the said terms
which is mentioned in contract.
APPLICATION
By undertaking this case study, in the relevant cases, facts which are examined in this case is
that the rules which are discussed previously are applied in this case study. As the investors feels
that they are fraudently enter into the contract with the housing plan regarding getting the more
profits through their investment11. Thus, as per the decisions given by house of lords, it is stated
that the majority is to be raised in respect of entering into the rescission regarding under
influencing them to invests in particular projects or can demand claim for the losses incurred12.
As by applying laws in this particular case, the judgement is raised and also courts use the
principle of interpretation in respect of resolving disputes between the parties. In this case they
appoint the person which is familiar with all such perspective and also knowledge in undertaking
9 Singh, I., Anwar, A. and Rasuly, A., 2018. Prevalence of fragility fractures according to
quality and outcomes framework (QOF) of the general medical services (GMS) contract and
quality initiatives to improve osteoporosis care in the general practice within Caerphilly County
Borough, Wales, UK: a feasibility study. MOJ Gerontology and Geriatrics. 3(2). pp.98-104.
10 380. PRENN V SIMMONDS [1971] 1 W.L.R. 1381. 2018. ONLINE. AVAILABLE
THROUGH https://charterpartycases.com/case/380-prenn-v-simmonds-1971-1-w-l-r-1381
11 MacQueen, H. L., 2018. The Scottish Law Commission's Contract Report 2018.
12 Wielsch, D., 2018. Contract Interpretation Regimes. The Modern Law Review. 81(6).
pp.958-988.

the matters relating to calculating the actual losses which is suffered by investors13. As most of
the investors agree with rescission the contact as the claim which they are getting is less but if
they take over the possession for the property, they can secure the money in right way.
In respect of interpretation of contract, this is mainly undertaken in relation to resolving
the disputes which is faced by investors regarding getting fair decisions, Thus, after this
perspective, the application which is made under the principles are accurately implemented, as
the decision of the judges of the courts are relating to carrying the simple and easier languages
which helps investors on choosing the right decisions14. Thus, if any person is using the incorrect
languages or using the double meaning words in court, they are punishable under the misleading
act. By applying this case study, in this relevant case, it examines that it is necessary the contract
must be based on accurate terms and also the matters which is mentioned in contract must reflect
the accurate aspects15. As most of the conflict or violation occurs through not getting proper
entries or terms in contract or also the presentation which is made by parties is contract not
clearly reflect the reason behind entering into the contract.
In context of applying the rule of interpretation of contract in this case, it is examined that
the issues are examined and overcome regarding not undertaking the same meaning which is
carried by every person. As in this case study, the person is confused regarding interpreting the
meaning of words which is suggested by the person who offers to enter into the contract. Thus,
by referring case to the skilled person who firstly handle the matters, understand the reason
behind using such word and then gives the decision16. The decision which is made by courts and
judges are important as through their decision the dignity of the parties is examined. In such
13 Griffin, P. B., 2018. The Notion of Good Faith in Common Law and Civil Law Contract
Law.
14 Khorooshi, A. and et.al., 2017. Basis of Contract Clause in the UK and the Necessity for
Reforming Insurance Law in Iran. J. Pol. & L. 10. p.156.
15 McLauchlan, D., 2017. Some Fallacies Concerning the Law of Contract
Interpretation. Available at SSRN 3123371.
16 Heidemann, M., 2018. Object and Purpose as Interpretation Tool in International
Commercial Law Conventions: How to Make the ‘Top Down Approach’Work. In The Future of
the Commercial Contract in Scholarship and Law Reform. (pp. 407-435). Springer, Cham.

manner, the principles of interpretation are undertaking in this relevant case so that fair decision
are given to parties to settle disputes in better way.
CONCLUSION
From the above study, the report concludes the matters relating to the undertaking the
aspects mentioned under the interpretation of the contract. If parties decided to extend the
business with other parties, they enter into the contract with signing the agreement. As agreement
is mutually bound upon the parties regarding following the terms or condition. In respect o
interpretation of the contract, it is examined though interpret the condition, verifying the facts
and matters which is mentioned in the contract and also make appropriate decision which
resulting in providing fair decision to parties. Thus, in such manner, it helps in verifying
particular matters through which the judgement is raised in right perspective. By applying the
principles in the interpretation of contract, it helps in bounding parties to deal in fair condition
and also equivalent number of punishments is imposed in respect of violation occurs in any of
the terms.
In this report it also examined that there are certain cases which reflect the situation which
occurs through not using clear words in contract which affects the right of the parties. In this case
the violation occurs in respect of negligence or breach in relation to not fulfilling the terms and
stipulation mentioned in contract.
CONCLUSION
This report explains the meaning of the interpretation of the contract and also the usefulness
behind choosing this contract to settle disputes. Usually this is the decision of the court that they
appoint the skilled and trained person who carried the wider range of Knowledge in every filed
to settle the matters in right manner. Through these aspects, it helps in undertaking the decision
regarding providing effective decision to parties whose rights are violated in respect of not
applying the correct laws or not providing accurate decision to secure their right and liabilities.