Interpreting a clear price escalation clause that became a bad bargain (Arnold v Britton)

In Arnold v Britton the Supreme Court held that commercial common sense and surrounding circumstances should not be invoked to undervalue the importance of the language of the provision being construed. Lord Neuberger said commercial common sense is not to be applied retrospectively: the mere fact that a contractual arrangement, interpreted according to its natural language, has worked out badly or even disastrously for one party is not a reason for departing from that language. A court should be very slow to reject the natural meaning simply because the term appears imprudent, since the purpose of interpretation is to identify what the parties agreed, not what the court thinks they should have agreed. Clause 5 is clear and unambiguous, agreed between advised commercial parties. It will be given its natural meaning: a compounded 8% annual increase.

Why A is wrong: Commercial common sense is judged as at the date of the contract, not with hindsight, and cannot override clear words.

Why C is wrong: Clause 5 is a precise formula; that the parties misjudged inflation does not make it uncertain.

Why D is wrong: The court's role is to interpret what was agreed, not to rewrite a bargain because it has become unfavourable.

Why E is wrong: Clause 5 is not ambiguous, so there is no room for construing it against either party.