Over the last decade, I have seen many situations where disputes arise due to a badly or ambiguously drafted contract. Often, a client will have obtained a precedent from the internet or used one of the many (unregulated) providers that can be found on the internet.
The problem with this is that a contract has to be properly drafted if it is to reflect the true agreement made and also to protect the parties interests.
It is not possible from the information below to ascertain how the contract was drafted. What is clear though is that it was badly drafted to the detriment of one party. The best advice I can give to anyone entering into any form of contract is to ensure that contract is either drafted by a solicitor or indeed checked by a solicitor to avoid issues such as below occurring.
Large sums of money can hinge on the interpretation of a very few words, and that is why professional drafting of agreements is so important. That point was powerfully made in a High Court case concerning an option to purchase a commercial property.
The tenant of the property had paid £25,000 for the five-year option. It enabled the tenant to purchase the freehold for a fixed price of £1.5 million at any time during the first two years of the agreement. In the following three years, the price payable was £1.5 million or the open market value, whichever was the greater.
In the fifth year of the option, shortly before it expired, the tenant purported to exercise it by offering £1.5 million and paying a £90,000 deposit. The landlord denied that the option had been validly exercised on the basis that there had been no agreement or determination of the open market value.
In ruling on the dispute, the Court noted that it was rooted in the poor drafting of the agreement. The landlord’s interpretation of the option was divorced from reality in that it would require the tenant to guess the open market value before seeking to exercise it. A reasonable person would not have expected the option to be modelled on a lottery. In finding that the option had been validly exercised, the Court concluded that the tenant’s interpretation made greater commercial sense.
