Contact one of our advisors now Call 0800 088 6004

Conditional Contracts And The Perils Of Ambiguous Drafting

The High Court has overturned an earlier summary judgment decision that allowed a buyer to rescind a conditional contract. The strict interpretation now applied by the court leaves the buyer in a difficult position.
The buyer had a right to rescind a conditional contract where “all of the Conditions have not been discharged… by the Longstop Date”. The contract related to the purchase of land and its development as a superstore. The conditions required to be met before the contract became unconditional included conditions relating to the granting of planning permission and consent to highways works.
The High Court had previously applied a commercial, common sense interpretation based on the principles set out in Arnold v Britton [2015] UKSC 36 and decided that the clause entitled the buyer to rescind unless all of the contractual conditions had been satisfied by the longstop date.
On appeal, the High Court applied a more literal approach which they said was based on grammatical correctness; they determined that the right to rescind only applied where none of the conditions had been discharged by the longstop date. Unless the buyer could show that all four of the conditions (rather than just one) set out in the contract remain unsatisfied, the buyer was not entitled to rescind.
This case is a useful reminder of the need for unambiguous drafting and the disastrous consequences that can arise when ambiguity creeps in, even where it seems apparent or obvious what the drafting was intended to achieve. It is also an interesting approach taken by the High Court given the strict interpretation of the clause and the reliance placed on the buyer’s alternative grounds of rescission under the contract. The nature of the contract will be familiar with those involved in development work and the court’s interpretation may come as a worrying surprise. (Dooba Developments Ltd v McLagan Investments Ltd [2016] EWHC 2944 (Ch).)
This case further highlights the importance of careful drafting of documents, as touched upon in our previous article  and the need to seek expert legal advice on such documents.  Our Legal 500 recognised Housing and Commercial Property  have a wealth of experience drafting development agreements (such as the type referred to in this case) and conditional contracts generally.  If however you already have such an agreement in place, but fear there may now be issues as a result of this case then our Commercial Litigation team are on hand to assist you.
For further information please contact Tom Warrender.