The recent case of Thorney Park Golf Ltd (t/a Laleham Golf Club) v Myers Catering Ltd [2015] EWCA Civ 1 demonstrates the dangers of unclear drafting.

The original county court judgment was appealed on a point of construction, namely whether the agreement was for:

  • an initial term of 3 years and terminable thereafter by either party on 4 months’ notice; or
  • a fixed term of 3 years and terminable within such term by either party on 4 months’ notice.

The relevant provisions of the Agreement (which was unsigned but held to be in force) were:

  • clause 4 – which states “in order for this contract to be reasonable for both parties to develop and invest in a viable business development plan an initial term of three years (with the fee reviewed annually) must be agreed”
  • clause 6 – which states “… otherwise either party may terminate this agreement without given reason in writing giving four months’ notice or any such period that is mutual to both parties.”

The initial judgment held the wording was clear in stating either party may terminate at any time on 4 months’ notice. This was regarded as not ‘commercially disastrous’ for Myers as it was a mutual right to terminate, the right to terminate for convenience had been increased by 1 month compared to a previous contract and the right was mutual.

Conversely, on appeal LJ McCombe found the term ‘initial term’ in clause 4 should be taken as meaning ‘fixed term’ given the agreement had been drafted by a layman and ‘exactitude of language may perhaps not be expected.’

Further, clause 4 stated the 3 year initial term ‘must be agreed’. He believed the parties’ commitment to the other terms of the agreement was conditional on acceptance of this initial term and the initial judgment “fails to give suitable effect to clause 4, the forceful terms in which that clause is expressed and the making of Thorney Park’s agreement conditional upon it.’ The appeal was upheld and a notice of termination served within the first 3 years of the agreement’s term held to be a breach of contract.

The case demonstrates some of the common pitfalls when laymen draft contracts. These include:

  • unnecessary descriptions or explanations – including the rationale behind a clause’s inclusion may open up its interpretation and enforceability to argument.
  • agreements to agree – agreements to agree are not generally enforceable.
  • accidental contract – in this case, the parties never signed the terms of the agreement but were still held to be bound to its terms by course of dealings.

The case acts as a useful reminder of the risks involved if companies draft and enter into agreements without first seeking professional legal advice.

For more information please contact our Commercial Team.