Angels and Devils

The devil may be in the (grammatical) detail, but now it seems that the angel of common sense is coming to assist contract law.

After many, many years (you could even say decades) of some English courts interpreting liability clauses in a very strict manner and refusing to support unclear or vague wording, in Royal Devon & Exeter NHS Foundation Trust v ATOS IT Services UK Ltd [2017] EWHC 2197 (TCC), the Court of Appeal has again recognised that the commercial reasoning behind a contract should be used to interpret an ambiguous limitation on liability. Reservations against enforcement of a clause based merely on grammatical issues were not accepted by the court in this case.

It had been argued by legal counsel that a particular provision of a contract was uncertain and unenforceable as a general cap on liability because in some places the wording referred to “a claim” (singular) but in other places to “claims” in the plural. The contention was that this created uncertainty as it could be a per event limitation rather than a general cap. However, the court disagreed and held that the clause was capable of interpretation (by reading the references to claim(s) in the singular) and was, therefore, enforceable.

In giving her judgment, O’Farrell J made several comments on the court’s approach to contractual interpretation, including:

a) the courts will strive to give effect to all contractual terms agreed by the parties where possible, and  will be reluctant to find that a contractual provision is void for uncertainty; and
b) where there are competing interpretations of a provision, one of which makes commercial sense and  the other which does not, it is open to the court to prefer the former.

This may all seem to be self-evident and a matter of commercial common sense, but it is a far cry from some court judgments in previous decades. Nevertheless, those drafting such liability clauses are well-advised to make the wording “PPD” (plain, precise and detailed), avoiding the potential devil in the details and hoping for the angels of common sense.