Lack of clarity in contracts leads to unhappy outcomes

In Anglo Continental Educational Group (GB) Ltd (“A”) and Capital Homes (Southern) Limited (“C”) Court of Appeal 2008 EWHC 2201Ch Lady Justice Arden said in her ruling that courts should look at whether there is an interpretation of a poorly written agreement that would make it effective. If so this should be chosen in preference to an interpretation that would have no effect.

 

Although this may appear a very positive “can do” approach it could lead to expensive court cases in which interpretations are reached that please neither party. Likewise it demonstrates the uncertainty of litigation and how substantial costs could be incurred without certainty over the end result.

 

Accordingly you are advised that in order to have a contract operating that matches your intended interpretation one has to be drafted to suit-made to match.

 

The facts here concerned property and covenants restricting the use of houses owned by a trust and the buyer went ahead and bought certain buildings without seeking changes of the restrictive covenants first. It then tried retrospectively to obtain the seller’s discounted price that included cost of obtaining permission on the restrictive covenants but that this was rejected by the court that adopted its own interpretation of the clause and made its own.

 

As it can be so difficult/impossible to predict the outcome of certain disputes the best approach is to avoid disputes where at all possible and one easy way to do so is to have clearly drafted contracts in place.

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