James is a Partner and Head of the Dispute Resolution team and primarily handles commercial…View Profile View all
Often in letters parties will request a response by “close of business” on a particular day. Some agreements refer to steps having to be taken by “close of business” but what is “close of business”?
The High Court has considered that phrase in a recent judgment.
The Court had to consider a notice clause in an agreement which provided that a default valuation notice would be deemed received on a particular day if it was received before “close of business”. There was no interpretation provision in the contract as to the meaning of that phrase.
One of the parties to the Agreement submitted a notice to the other’s London office at 18:02 hrs on 22 September 2008. The recipient argued that the notice should be deemed received on the following day because, close of business in London would be regarded by a reasonable person a 17:00 hrs. The sender of the notice argued that was not a proper interpretation of the phrase and indeed “close of business” should properly be interpreted as 19:00 hrs.
The Judge did not agree with the recipient of the notice. He said that in the context of the financial business covered by the contract, which involved a major oil company and an international investment bank, a reasonable person would be surprised to hear that close of business was 17:00 hrs. The Judge said it was for the recipient to establish what close of business meant as it was arguing the notice had been received too late, but it did not produce any admissible evidence to substantiate its position.
The Judge was asked to consider when close of business for “commercial banks” took place in London. The Judge was shown a working definition from the Financial Times Lexicon but he took the view that the expression “commercial banks” did not have any particular meaning in English law. The recipient’s argument was that the Court ought to look at what might be called normal business hours such as those worked by ordinary businesses and high street banks, rather than later hours worked by investment bankers, commercial lawyers and businesses of that sort. The recipient’s expert had not addressed the point in his report and the sender’s expert said although it was a rough approximation in his view, in the modern world commercial banks closed at about 19:00 hrs. Although stressing this was limited to that particular case, the Judge said that he was prepared to accept that evidence.
In the circumstances, perhaps to avoid unnecessary uncertainty, letters requiring responses or agreements specifying times by which acts should be done, should be more specific noting a particular time rather than a nebulous phrase such as, “close of business”.
For further information please contact James Staton on 01274 306 000.