Key point

The Court's task, when parties choose to agree different sets of terms dealing with the same subject matter (in this case, interest), is to see whether, notwithstanding the difference, they can be read together in a commercially sensible manner.

The Facts

A mortgage contract (the "Contract") incorporated terms from two documents – an offer letter and the conditions.  The Contract contained a priority clause stating that the terms in the offer letter would prevail over the conditions if there were inconsistencies.  The bank sought to vary the interest rate pursuant to the conditions, which according to the claimant, conflicted with the terms in the offer letter.  The claimant, relying on the priority clause in the Contract, argued that the terms in the offer letter prevailed over the conditions so that the defendant could not vary the rate pursuant to the conditions. The claimant also challenged the bank's right to terminate the mortgage on notice due to inconsistencies in both documents.

Decision

The Court held that the bank was entitled to (a) rely on the conditions to vary the interest rate, despite the existence of the priority clause; and (b) terminate the mortgage on notice. The terms in the offer letter and the conditions were not inconsistent or contradictory as the clauses could be read as modifying or qualifying one another.

Comments

The question before the court was one of construction of the parties' agreement rather than whether it is fair for the lender to rely on the conditions where the particular clauses are not drawn to the attention of the borrower.

> Alexander v West Bromwich Mortgage Company Ltd