When it comes to Contracts - Say what you mean.
A repurchase agreement, made between Lehman Brothers and ExxonMobil Financial Services BV, has spurred a judgement from The High Court.
It was the termination provisions within the contract which raised eyebrows in particular. In short, Lehman had provided securities in the form of equities and bonds to ExxonMobil. Under their contract, for a particular type of notice to be deemed received on a particular day, it had to be received before “close of business”.
The contract, however, did not specify what “close of business” meant exactly.
ExxonMobil submitted a notice to Lehman’s London office at 6.02pm.
Lehman contended that “close of business” in London meant 5.00pm (and so the notice was not deemed received until the following working day) and ExxonMobil said that “close of business” in London meant 7.00pm (and so the notice was deemed received on that working day).
This was important because the sums at stake were significant.
ExxonMobil argued that it was for Lehman (as the party alleging that the notice had been received too late) to establish when close of business occurred, and Lehman had not been able to do so. The judge accepted that this was sufficient to decide in ExxonMobil’s favour. However, there were some further interesting arguments about when commercial banks in London generally close and after some, admittedly approximate, expert evidence it was concluded that 7.00pm was a realistic estimate in the modern world, a point which strengthened ExxonMobil’s position as well.
If you wish to avoid an argument in court,
it’s important to be specific and realistic about what you are doing, why you are doing it and what you want to achieve – and it’s vital to detail it in your contracts.