03 Apr 2017

Say what you really mean… the importance of clarity

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The real deal

In our day to day lives we often use language that can be interpreted in more than one way. We think that we're being clear, but ambiguity can lead to unexpected results. A humorous example is provided by Father Ted, when talking to one of his more dangerous parishioners: "When I said "take care of" the rabbits, I was thinking in a Julie Andrews kind of way. I now realise you thought I meant it in an Al Pacino sort of way".

Loose language can have legal consequences too. If we use imprecise language in heads of terms or formal legal agreements, it may not be clear what the "real deal" is, which can lead to one or both parties not getting what they wanted or expected.

Conditional agreement

You're looking to buy a particular site for a major development. You only want the site if you can construct your planned development, so the deal is to be conditional on a number of things, including a planning condition and a highways condition.

You can't wait around for ever, so you also have a longstop date and the agreement says that you can terminate the deal "if all of the conditions have not been discharged by the longstop date". So you've got a watertight deal, right?

Termination and interpretation

You get to the longstop date. Planning has been granted, but the highways obligations are outstanding. You're fed up with the deal, so you decide to pull the plug and serve notice to terminate. "You can't do that" says the seller – "one of the conditions has been satisfied, so you can't say that "all of the conditions" haven't been discharged". "Rubbish" you say… or is it?

Literal meaning

The facts above broadly mirror those in the recent court decision in Dooba Developments Ltd v McLagan Investments Ltd. In that case the court held that the literal meaning of the clause providing for termination "if all the Conditions have not been discharged" was that the power to terminate only arose if none of the conditions had been discharged by the longstop date. That may seem surprising, but reading the provision with forensic eyes it is strictly correct, because some of the conditions had been discharged.

Next time…

The moral is to avoid ambiguity wherever possible. In the heat of a deal it's easy to read things as we wish them to be rather than as they actually are. It's always worth re-reading documents from heads of terms to full agreements to check that they say what you really mean.

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