The rules for successful legal drafting are easily stated but much harder to follow. Advisers should find out what the client wants, analyse it to ensure that it stands up and express what is needed in a language that is as precise and as clear as possible.
Careful use of definitions is also essential. Definitions provide a convenient shorthand method of referring to a particular word or phrase repeatedly throughout an agreement. However, they also add clarity and certainty to the meaning of a document. The decision in Curley v Hollier [2007] PLSCS 217 demonstrates the importance of attaching definitions to key words and phrases that will have important legal consequences for the parties.
The parties entered into heads of agreement concerning a joint venture to develop land. The land had the benefit of outline planning permission for development, but the permission was due to expire and was unlikely to be renewed. As part of the arrangement, the claimants advanced £500,000, which was repayable if the joint venture did not proceed before a specified date that was closely tied to the date upon which the planning permission expired. In return, the landowner guaranteed the claimants a profit–share of at least £250,000, and promised to repay the loan if the joint venture did not proceed.
The deadline came and went, and the parties disagreed about whether the joint venture had ever got off the ground. The crucial question was: what exactly did the parties mean by the word “proceed”? Did the fact that the parties had incorporated a company as the vehicle for their joint venture, and had carried out some preliminary building work on site, mark the beginning of their joint venture, or was something more required?
The High Court agreed that the heads of terms were imprecise and could be interpreted in different ways. After weighing the evidence, the judge decided that the parties could not have intended that the landowner would be liable to pay the guaranteed profit-share, in circumstances where the development could not proceed, simply because the parties had taken some steps to implement the heads of terms.
Therefore, the issue of whether the joint venture was up and running must be linked to the status of the outline planning permission, as well as to the existence of a joint venture vehicle. On this basis, it was clear that the joint venture had never got off the ground. The parties had taken various steps to try to get the development up and running, but they were unsuccessful and the outline planning permission had expired with various conditions unfulfilled. Consequently, the claimants were entitled to reclaim the sum advanced to the landowner, and the landowner was relieved of the liability to account to the claimants for the guaranteed profit-share.
Parties to contracts should be clear about their commitments. Legal draftsmen can assist by identifying any key milestones in a project and ensuring that the parties’ agreement prescribes any conditions that must be met to pass each of those milestones.
Allyson Colby is a property law consultant
