The High Court recently used “commercial common sense” to interpret an ambiguous clause in BlackLion Law LLP v Amira Nature Foods Ltd  EWHC 1500 (Ch).
The claimant law firm raised a claim against a former client (the defendant) for non-payment of fees in relation to a bonds issue.
The clause provided for a fixed sum of £300,000 to be payable by the client to the law firm “subject to the completion of the matter by 31 May 2017”.
The law firm argued this meant any work carried out after 31 May 2017 would be subject to an additional charge.
The client, however, argued that it meant that if the matter was not completed by 31 May 2017, no fees at all would be payable.
The court considered the contract wording to be ambiguous – both meanings were possible. The court looked at the context, the purpose of the document and what made commercial sense. Here it was not likely a small business like the law firm in question would have agreed such a large contingency fee in these circumstances.
As a result, the court found that the law firm’s interpretation of the clause was the correct one – that the defendant client was required to pay the £300,000 and any further work after 31 May 2017 would be subject to an additional charge.
As always, ensure there is a genuine agreement on key commercial terms and that the drafting is crystal clear – this avoids the uncertainty of interpretation by the courts.
If the contract is unclear, context and therefore business common sense can be of paramount importance for interpretation.
It is worth noting that if the contract wording is unambiguous the courts won’t intervene, and the wording will be taken to mean what it says. A rectification claim may be possible, but this requires the claimant to show the language used must be changed to reflect the true agreement of the parties.