Watch your Ps and Qs is an old expression that refers to being on one’s best behaviour. However, it has a literal meaning when it comes to the drafting of contracts. A misplaced comma or a forgotten word can result in different interpretations of a clause or sentence. In construction contracts, that could mean large claims for compensation.
Take the example of a recent case before the British Columbia Court between Nettwerk Productions Ltd. and Wei Guang Real Estates Development Ltd.
Wei Guang had purchased a commercial property from Nettwerk in Vancouver with the intention of redevelopment. Among the various warranties and guarantees made by Newtterk to Wei Guang was one that stated, “the lands have never been used to manufacture, refine, handle, store or dispose of any hazardous substance, except in compliance with all applicable laws, regulations and orders and do contain, nor to the knowledge of the vendor have they ever contained, any hazardous substance.”
See the problem? The word “not” appears to be missing. Wei Guang certainly noticed the omission, but not until after signing the purchase agreement and discovering contaminated soil on the site. Wei Guang went after Nettwerk for damages and costs resulting from the breach of the warranty.
Nettwerk argued essentially there was no error and that “do contain” did not mean “do not contain,” and that the court could not rewrite the contract.
The court ruled in favour of Wei Guang for a number of reasons.
Mark Youden, Jeremy Sapers and Nicholas Tollefson of Gowling WLG’s Vancouver office were counsel for the plaintiff, Wei Guang, and summarize the view of the court in this case.
- “Drafting errors in contracts may be addressed using the general principles of contractual interpretation.
- When interpreting a clause containing a drafting error, the grammatical structure of the clause can serve as an important indicator of the contractual parties’ intentions.
- How one contractual party understood a clause containing a drafting error is likely inadmissible in determining the true meaning of the clause, unless that understanding was communicated to their contractual counterparty.
- When interpreting a clause containing a drafting error, interpretations which lead to a commercially sensible result should be adopted, and interpretations which lead to commercially absurd results should be rejected.”
Not only does such a common sense decision and avoidance of a “commercially absurd result” satisfy most observers, but English grammar itself supports Wei Guang’s contention that the missing “not” was an unintentional omission.
As noted by Youden, Sapers and Tollefson, “the court noted the use of the conjunction ‘nor.’ The clause states that the lands ‘do contain, nor to the knowledge of the vendor have they ever contained, any hazardous substance.’ The court, citing the Oxford English Dictionary, noted that the modern use of the conjunction ‘nor’ is to link two negative statements. The court found that this suggested that the two statements in Clause 6(r) linked by the conjunction ‘nor’ were both intended to be negative in substance.”
This is not the first time courts have backed away from stark interpretations of contract language and instead maintained an objective view and plain reading.
Sahil Shoor, partner with Gowling WLG in Kitchener, Ont. said when two parties take opposing views on contract interpretation, the court’s job is to step back and make interpretations based on what would be commercially reasonable and what were likely the intentions of the parties at the outset.
At the same time, care needs to be taken when drafting agreements, he says. It almost goes without saying that a second pair of fresh eyes can catch small typographical and grammatical errors before they become major misunderstandings.
It’s also hoped that disputes such as the Wei Guang/Nettwerk dispute can be resolved without going to court.
Shoor says that, in fact, 90 per cent of disputes are resolved outside of court. The risk to either party of an unfavourable and costly ruling usually encourages resolution rather than litigation.
John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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