A recent Court of Appeal decision provides a useful reminder of the courts' approach to resolving inconsistency in cases where there is an inconsistency clause incorporated in the relevant contract:Alexander v West Bromwich Mortgage Company Ltd  EWCA Civ 496.
In this case, the Court of Appeal considered the right of a lender to rely on standard term mortgage conditions that contradicted the special conditions of a "tracker mortgage". In particular, the case concerned whether the lender could rely on provisions entitling it (1) unilaterally to vary the loan interest rate for any "valid reason" and (2) to terminate the mortgage on one month's notice absent borrower default. The contract contained an "inconsistency clause", favouring the lender's bespoke "Offer of Loan" over its standard conditions in the event of inconsistency. The court agreed with the borrower that both the standard conditions in question were inconsistent with the specific terms of the "tracker mortgage" sold to the borrower and hence could not be relied on by the lender.
The court noted that, where there is an inconsistency clause, the question of inconsistency should be approached without any pre-conceived assumptions: "one should not strive to avoid or to find inconsistency". The courts' general reluctance to find that parts of a contract are inconsistent with each other does not apply where the contract itself acknowledges, through the inclusion of an inconsistency clause, that inconsistency may exist. As to what amounts to an inconsistency, it is is not enough if one term qualifies or modifies the effect of another; there will be an inconsistency if the clauses cannot fairly or sensibly be read together.
For more on the decision, please see our banking litigation e-bulletin.