28 May

Introduction / Knowledge of Facts / "Private Dictionary" Principle / General Object of the Contract / Process of Reaching a Written Contract / Negotiations Leading to a Settlement / Arguments against exclusionary rule / Conclusion


When it comes to interpreting contracts, it is essential to consider the role of pre-contractual negotiations and statements. 

While the general rule is to exclude evidence of such negotiations, there are certain circumstances where they may be admissible. 

This article explores the key points about the admissibility of pre-contractual negotiations and statements to provide a better understanding of this topic.

Knowledge of Facts:

 Evidence of pre-contractual negotiations may be admitted when there is an issue regarding the parties' knowledge of certain facts relevant to the agreement. This evidence helps establish the parties' state of knowledge when signing the written agreement.

"Private Dictionary" Principle:

The "private dictionary" principle allows the court to examine evidence of negotiations when words in an agreement are capable of bearing more than one meaning.  

If the parties have negotiated on an agreed basis that the words bear only one of the possible meanings, evidence of those negotiations may be admissible to determine that meaning.  However, this principle is narrowly applied and requires a clear agreement between the parties.  

General Object of the Contract:

There is some uncertainty regarding whether the content of pre-contractual negotiations can be considered to establish the parties' objective aim in completing a transaction.  

While caution is advised, evidence of negotiations may be considered when it relates to the genesis and objective of a transaction.  

Process of Reaching a Written Contract:

 Evidence of pre-contractual negotiations may be admissible when understanding the process by which varying drafts of the agreement were produced.  

This includes identifying who may have drafted specific clauses and can be relevant for the application of the contra proferentem principle.  

Negotiations Leading to a Settlement:

Evidence of pre-contractual negotiations may be admissible when determining the damages in a settlement agreement resulting from breaches by a third party. In such cases, the exclusionary rule does not apply, as it would be unfair not to consider all available material. 

Arguments against exclusionary rule

a. Incompatibility with Context-Based Approach: Excluding pre-contractual negotiations is seen as incompatible with the modern, context-based approach to contractual interpretation. Critics argue that understanding the parties' intentions and the commercial context behind the contract's terms requires considering pre-contractual negotiations as relevant evidence. 

b. Inconsistency with International Instruments: English law's exclusionary rule is inconsistent with approaches taken in important international instruments such as the UNIDROIT Principles, the Vienna Convention on Contracts for International Sale of Goods, and the Principles of European Contract Law. These instruments allow consideration of pre-contractual negotiations, highlighting the divergence in approaches. 

c. Artificial Distinction in Admissible Evidence: Critics argue that the distinction between admitting evidence of the "factual matrix" or surrounding circumstances (which is allowed) and excluding pre-contractual negotiations (which are not allowed) is artificial and difficult to maintain in practice. This artificial distinction can lead to confusion and inconsistent application. 

d. Undermines Ascertainment of True Intentions: Excluding relevant evidence of pre-contractual negotiations is seen as undermining the court's ability to ascertain the true intentions of the parties. Critics argue that by excluding such evidence, the court may miss crucial information that could provide insight into the parties' objectives and the commercial context of the contract. 

e. Inconsistent Application at Lower Court Levels: Lower courts in England have admitted pre-contractual negotiations in various circumstances, leading to inconsistent approaches and uncertainty in the application of the exclusionary rule. This inconsistency adds to the criticism that the rule lacks clarity and predictability. 

f. Concerns about Increasing Litigation Costs: Some critics argue that excluding pre-contractual negotiations can lead to increased litigation costs. They suggest that effective use of procedural rules, such as disclosure, can manage these concerns without the need for a blanket exclusionary rule. 


It is important to note that the admissibility of pre-contractual negotiations in contract interpretation is subject to strict interpretation and limited exceptions. 

The criticisms of excluding pre-contractual negotiations from contract interpretation revolve around its incompatibility with modern approaches, inconsistency with international instruments, artificial distinction in admissible evidence, undermining the ascertainment of true intentions, inconsistent application at lower court levels, and concerns about increasing litigation costs 

However, the general rule remains that evidence of pre-contractual negotiations is excluded, and the final written contract is the primary source for interpreting the parties' intentions. 

See also article on How are contracts interpreted?

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Note: This publication does not necessarily deal with every important topic nor cover every aspect of the topics with which it deals. It is not designed to provide legal or other advice. The information contained in this document is intended to be for informational purposes and general interest only. 


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