A judge in the High Court recently had the task of interpreting a complex commercial contract which appeared, through a desire to include everything, to have lost clarity.
In such circumstances the approach of the courts is to consider the contract as a whole, give the words their natural and ordinary meaning, consider the parties relationship and relevant facts and if there are two possible constructions the court is entitled to prefer that which is consistent with business common sense.
Lincoln Centre Belfast Limited v Northern Ireland Housing Executive concerned the development of a 2.6-acre Belfast city centre site. The development company had been selected by the Housing Executive in 1998 as the preferred developer for the site which included construction of a basement car park with hotel, apartments and offices.
Whilst part of the development has been completed, including Day's Hotel, the construction of the car park had not commenced and in 2010 the Executive was informed by the developer that funding was not available for the underground car park and that it wished to alter the scheme to build a multi-storey car park.
The Executive believed that the changes provided "a lower quality and piecemeal alternative which did not meet the objectives of the original design competition". It terminated the development agreement in late 2010.
The development company instigated proceedings against the Executive arguing that the Executive was obliged to consider the amended scheme and could not merely terminate the agreement. The crux of its argument was that the definition of the works in the development agreement allowed for an evolving process, that the programme for the works could be altered with consent which could not be unreasonably withheld and that the Executive was required to take into account its changed circumstances in relation to ability to obtain funding. The courts did not find in the developer's favour. Instead the court held that the Executive was not obliged to consider the major alteration to the scheme and concluded that the developer's interpretation of the contract was contrary to "business common sense".
Celia Worthington, senior partner of the commercial department of Worthingtons Solicitors, Belfast office can be contacted on email@example.com