The major principles developed by the courts to assist in the interpretation of contracts. There are 7 major principles:
- the contract must be read as a whole (see Chapmans Ltd v Australian Stock Exchange Ltd (1996 67 FCR 402);
- as well as containing express terms and conditions a contract may also contain implied terms necessary to give it efficacy (see Codelfa Construction Pty Ltd v State Rail Authority (1982) 149 CLR 337);
- a commercial document, such as an insurance contract, should be construed in accordance with sound commercial principles and good business sense (See Maggbury Pty Ltd v Hafele Australia Pty Ltd (2001) 210 CLR 181);
- words in a contract should be given their ordinary meaning as understood by the ordinary reasonable person (See Heydon and Crennan JJ in Byrnes v Kendle (2011) 243 CLR 253 at paragraph 284);
- where general words follow an enumeration of particular things, the general words are restricted to matters of the same genus as those specifically enumerated (ejusdem generis);
- where there is an ambiguity, a clause will be construed against its draftsperson or the person for whose benefit it was intended (contra proferentem); and
- parol or extrinsic evidence is not generally admissible in construing a written contract (Parol Evidence Rule).