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The High Court allows the rescission of a conditional sale agreement despite ambiguity

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The High Court allows the rescission of a conditional sale agreement despite ambiguity

The High Court allows the rescission of a conditional sale agreement despite ambiguity

In the recent case of Dooba Developments Ltd v McLagan Investments Ltd (2016) the High Court was asked to determine whether an ambiguously drafted rescission clause within a conditional sale agreement (the “Agreement”) could still be upheld to allow the prospective buyer to rescind the Agreement.

The Facts

The Agreement provided for the purchase of a property (for £12 million) to be completed 28 days following one of two dates. The relevant date was the “Unconditional Date”, defined as “the date upon which the last of the [4] Conditions is discharged by satisfaction or waiver in accordance with the provisions of Schedule 4”. There was also a longstop date for the conditions to be satisfied.

The clause central to the dispute read as follows: “...if all of the Conditions have not been discharged...by the longstop date then either Asda or Dooba may rescind this agreement by giving the other not less than ten working days notice”. In determining what was meant by the Agreement, the Court was to consider whether the intention of the clause was to allow either party to rescind the Agreement after the longstop date unless some of the conditions were satisfied or unless all of the conditions were satisfied.

The Decision

Applying the principles of interpretation within established case law, the Court held that despite both interpretations being viable it was decided that the clause entitled either party to rescind unless all of the conditions were satisfied. As a result of the decision, the buyer was, under the Agreement, entitled to serve notice rescinding the Agreement.

The ruling in this case acts as a stark reminder to those drafting these types of agreements of the importance of drafting with precision to avoid the potential for dispute and ensure that the intentions of the parties are clearly represented in the agreement.

For more information, contact Michael Chilton.