One of the most famous Supreme Court rulings is the 1981 ‘Haviltex judgment’. In that ruling, the Supreme Court found that the interpretation of a contract depends not only on the text, but also on the parties’ intentions and what they could reasonably expect of each other. The Haviltex criterion is an important tool used by lawyers and judges in disputes about the interpretation of contracts. The Supreme Court recently ruled on the question whether the Haviltex criterion may be contractually excluded.

Summary of the case

The case before the Supreme Court centred on a dispute about the interpretation of a settlement agreement entered into in 2009 in the context of a divorce. The settlement agreement contained a contractual interpretation standard that, briefly stated, provided that the grammatical interpretation of the agreement prevailed over the parties’ intentions and the Haviltex criterion. The Haviltex criterion was therefore contractually excluded in that agreement.

The settlement agreement provided, among other things, that “The spousal maintenance will end on the day on which the wife reaches the retirement age, i.e. on 24 May 2021.”

The wife turned 65 on 25 May 2022 and will reach the state pension age on 25 May 2024.

The wife requested the court – notwithstanding the settlement agreement – to extend the end date of the spousal maintenance to 25 May 2022 or 25 May 2024. According to the wife, the date in the agreement was a clerical error: when interpreting the agreement, the consequences of a particular interpretation and the parties’ intention also had to be considered.

Court of Appeal’s ruling

The Court of Appeal held that the agreement had to be interpreted only on the basis of the concepts that could be interpreted in only one way. The Court of Appeal did not consider concepts in the agreement that could be interpreted in several ways (such as the term ‘retirement age’). To interpret those terms, the Court of Appeal would have to consider the parties’ intention and the Haviltex criterion – and that had been contractually excluded. The Court of Appeal found that the spousal maintenance ended on 21 May 2021 because that date was not open to more than one interpretation. The Court of Appeal refrained from interpreting the term ‘retirement age’ and the parties’ intention. The wife then appealed to the Supreme Court.

Supreme Court’s ruling

The Supreme Court upheld the Court of Appeal’s judgment. By doing so, the Supreme Court has confirmed that it is possible to contractually exclude the Haviltex criterion. An agreement is then interpreted only in accordance with the standard of interpretation contractually agreed on between the parties.

Conclusion

With this ruling, the Supreme Court has given parties the freedom to contractually define the interpretation standard of their agreement. It will be interesting to see how courts will deal with this: the Haviltex criterion gives courts (and parties) room to correct unintended or unreasonable consequences of an agreement. That room will disappear if the Haviltex criterion is increasingly excluded. However, it remains to be seen whether it is wise to include a contractual interpretation standard and to exclude the Haviltex criterion. The advantage of excluding the Haviltex criterion is that it creates more certainty. The agreements recorded on paper become a lot ‘firmer’. But this gives rise to the risk that a party drafting a contract never knows whether it will want to invoke the Haviltex criterion. It may then regret having excluded the Haviltex criterion.

Please contact Sander Pieroelie (+31-6-222 878 65) if you would like more information on this subject.

This article was published in the Newsletter Vestius of December 2023