Conditional Contracts: don’t over-egg the pudding!

Beware if drafting a sale contract with a conditional completion date: the Courts adopt a strict interpretation of conditional contracts.

The recent case of British Overseas Bank Nominees Ltd v Analytical Properties Ltd [2015] highlights the importance of ensuring the conditions to completion in a sale contract are absolutely clear, so that each party understands when actual completion will be.

The Buyer entered into a contract to purchase a shopping centre in Windsor.  The contract provided that completion was conditional on the Seller obtaining emergency lighting certificates “as soon as practicable and in any event prior to the date of Actual Completion”.  Actual Completion could, but didn’t have to, be the contractual completion date of 17 December 2013.

In fact, the emergency lighting certificates were not available on 17 December  and the purchase finally completed on 17 January 2014, once they had been provided.  The Buyer then claimed breach of contract.

The Court of Appeal found that the Seller was not in breach of contract for failing to provide the certificates by 17 December.  The failure simply meant the date for completion was postponed.  If the parties had intended 17 December  as a longstop date for completion, they should have made this explicitly clear in the drafting of the pre-condition.  Further. the Buyer could have insisted on completion on 17 December or waived the pre-condition but it did neither.

“Draftsmen tend to over-egg the pudding” said the Court and this case highlights the need for certainty and clarity in drafting, to avoid disputes over when completion will or should have taken place.

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