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Clarity and Contracts

A recent press story has highlighted the importance of clarity in commercial contracts and, in particular, how even a single word can have a resounding impact on the outcome of a contractual agreement.

Scotland’s Supreme Civil Court, the Court of Session, has been left grappling with the definition of the word “relegation” following a refusal by the betting giant Coral to pay out £250,000 on an arguably successful bet. A former bookie, 74-year-old Albert Kinloch, was offered 2500-1 odds by counter staff in September 2011 on the likelihood that the Glasgow Rangers would be relegated at the end of the 2011-2012 season. Kinloch states it was these odds, and his knowledge of the club’s financial difficulties at the time, that led him to put a £100 wager on the club’s, in his opinion, inevitable relegation.  

By the following summer, Rangers had gone into administration and they began the 2012-2013 season in the fourth tier, the lowest division in the Scottish Football League. However, Coral refused to pay out on the bet, insisting in the subsequent court case that relegation only applies to the teams who come last on points (Rangers had finished second in the table). Anything else, they argued, is “demotion.”

Kinloch’s team, on the other hand, have alleged the “common sense dictionary definition,” meaning to move down to a lower league. Certainly, dictionary definitions of this term do outline the transitive verb as meaning to “move to a position of less authority, importance, etc.” and commonly use the relegation of football teams as an example. Unsurprisingly, this case has attracted much attention and debate on social media, with the verdict due in the  forthcoming weeks.

A similar issue was encountered by our team recently with regard to advice sought from counsel in relation to a Pension Fund and whether a particular set of Regulations applied to the agreement in question. Our advisor’s conclusion was that the Regulations did apply, whilst his advice notes indicated the opposite. Upon clarification it transpired that he had simply left the word “not” out of his conclusion – a mistake that completely changed the outcome of his advice.  

So how can you avoid unnecessary disputes arising from ambiguous contract drafting?  To start, invest in getting your contracts well drawn up – ensure they are accurate and concise, and make your commercial intentions clear. Have your existing contracts  checked by an independent professional and keep them updated as your business evolves.

As demonstrated above, the English language is not always as clear as we intend it to be. Make sure you understand and intend the literal meaning of the words used and define your key terms to avoid ambiguity. Whilst a court’s first point of reference will be the natural and ordinary meaning of words, the English language leaves itself exposed to different interpretations depending on the context of the situation. That being said, leave as little down to interpretation as possible – all bets are off on which way a subsequent dispute may go.

 

These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.

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