Contractual precision …. a stitch in time

We’ve all been there. Rushing to get the deal done amidst increasingly fraught calls and emails between the client and other side.

Mistakes can happen when the pressure is on.

All too often commercial lawyers focus on making sure the contract they have drafted works well enough to get the deal through. However, transactional lawyers should not be afraid of putting on their ‘litigators hat’ well before the ink dries and terms are put to the test. Litigators often have to analyse contractual terms and wording when relations go sour.

So, understanding the principles of contractual interpretation are just as important to the transactional lawyer as they are to the litigator.

A recent Court of Appeal decision has re-stated the principles of contractual interpretation (Andrew Wood v Sureterm Direct Ltd & Capita Insurance Services Ltd). In this case, Capita Insurance Services Ltd acquired the entire shareholding of Sureterm Direct Ltd, of which Mr Wood was a majority shareholder.

In the sale and purchase agreement, the sellers agreed to indemnify Capita in respect of losses relating to the misselling of insurance products prior to the share sale. A dispute arose about that very point and the scope of the indemnity clause was called into question.

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