Two recent High Court cases have served to re-emphasise the importance of clear, accurate and unambiguous drafting when it comes to documenting legal arrangements. In Lehman Brothers International (Europe) (In administration) v Exxonmobil Financial Services BV, the vagueness of the expression "close of business" caused considerable confusion over the time of day by which a notice had to be received in order for that notice to have been deemed served on that particular day. In Dooba Developments Ltd v McLagan Investments Ltd, the mere use of the word "all", as opposed to "any", led to a dispute between the parties as to whether a right to rescind the contract had arisen. In each of these cases ambiguous drafting left one of the parties with a result which would not have been that party's intention at the time of entering into the contract.

Lehman Brothers International (Europe) (In administration) v Exxonmobil Financial Services BV [2016] EWHC 2699 (Comm)

Exxonmobil sent a default notice to Lehman Brothers which was received by Lehman Brothers at 6.02pm on 22 September 2008. The notice provision in the relevant contract provided that any notice received after "close of business" would be deemed to have been given at the opening of business on the following business day. Lehman Brothers contended that close of business was 5.00pm, whereas Exxonmobil argued that it was 7.00pm. In determining whether the notice was to be deemed served on 22 September 2008, the question for the High Court was therefore whether or not "close of business" was earlier than 6.02pm.

The court decided in favour of Exxonmobil, concluding that the notice was received by Lehman Brothers before close of business on 22 September 2008. Although Lehman Brothers believed that commercial sense leant towards an earlier rather than later time, and that a reasonable person would regard 5.00pm as the obvious time at which close of business occurred in London, Blair J disagreed based on the context of this particular case (i.e. the closing time of commercial banks in the modern world, which is invariably later than 5.00pm).

Dooba Developments Ltd v McLagan Investments Ltd [2016] EWHC 2944 (Ch)

Dooba and McLagan entered into a contract for the sale of land. The contract was conditional upon the satisfaction of four conditions and entitled either party to rescind the contract if "all of the Conditions have not been discharged… by the Longstop Date." Dooba failed to discharge one of the conditions by this date and McLagan therefore sought to rescind the contract. Dooba, however, argued that, as per the exact words used in the clause, a party was only permitted to rescind the contract if all of the conditions had not been satisfied by the longstop date. Accordingly, the question for the High Court was whether the right to rescind arose where any of the conditions had not been discharged by the longstop date, or only where none of them had been discharged by that date.

The court accepted Dooba's assertion, holding that the right to rescind only arose where none of the conditions had been satisfied by the required date. Although McLagan argued that the clear intention of the parties was that the right of rescission was to apply in the event that any of the four conditions had not been satisfied, the court preferred Dooba's literal interpretation of the provision which the judge considered to be the grammatically-correct approach. The court came to this view regardless of the fact that it would result in the contract subsisting with no certainty as to how or when it could be brought to an end.

So what?

These cases illustrate just two ways in which ambiguous drafting in legal arrangements - even in relation to seemingly innocuous provisions - can lead to disputes. Disputing contractual wording is a costly, time-consuming process which often results in one party finding itself bound to honour a commitment significantly different to that which it originally intended to undertake. Taking Dooba v McLagan as an example, in incorporating multiple conditions precedent to be satisfied before a particular date, it is extremely unlikely that McLagan at the time of entering into the contract wanted the contract to continue in the event that one of these conditions was not satisfied by the required date. However, due to the draftsperson opting for the use of "and" as opposed to "any" in the relevant clause, the judge in adopting a literal construction effectively locked McLagan into a seemingly interminable arrangement, even though Dooba had not fulfilled what McLagan had intended to be Dooba's side of the bargain.

In contractual arrangements, inadequate drafting can come back to bite the parties involved. In addition to being costly and time-consuming, resorting to the courts in order to resolve a drafting dispute is an inherently unpredictable process. Whilst the courts apply established principles of construction, there is always an element of litigation risk in how the judge will apply such principles to the facts. It is therefore impossible to predict with any certainty the approach that a judge will adopt; for example, will the judge adopt a literal approach to the wording of a clause without much consideration being given to the commercial context, as in Dooba v McLagan, or will he instead look more towards the context in which the dispute has arisen in order to unearth the intended meaning of the relevant provision, as Blair J did in Lehman Brothers v Exxonmobil?

Conclusion

Having considered the detrimental impact on businesses that ambiguous drafting can have, it goes without saying that the best approach for businesses in relation to the wording of their contractual arrangements is to be clear at the outset. When composing complex contractual documents, it is often easy for what may seem initially to be minor errors to creep in to the drafting. The dispute in Lehman Brothers v Exxonmobil, for instance, would have been avoided simply by stating expressly in the contract the specific time by which notices must be received in order to be effective. The two cases we have considered here go to show that the devil really is in the detail; it is very important for parties to sense-check their drafting so that it is as clear, accurate and unambiguous as possible in reflecting the deal struck.