Doing a Deal? Professional Drafting Avoids Costly Ambiguity!

There is little point in agreeing to settle a legal dispute if the wording of the deal is so ambiguous that it simply creates further scope for disagreement. In one High Court case that illustrated the need for clear professional drafting, both sides in a building contract dispute put forward their own very different interpretations of a compromise agreement.

A subcontractor claimed that it was owed about £86,000 by a construction company. After the latter refused to pay, the former threatened court proceedings. However, the subcontractor later made a formal offer to settle the matter for £65,000. The offer was made on the basis that, if the company delayed more than 21 days in accepting the same, it would be liable for all the subcontractor's legal costs in the case.

The offer was turned down and an adjudicator later awarded the subcontractor the full £86,000. When threatened with enforcement proceedings, the company finally accepted the £65,000 settlement offer. There was no dispute that, on acceptance of the offer, a binding compromise had been reached. However, by that stage the 21-day deadline had passed and an issue arose as to whether the company was liable to pay the subcontractor's costs of the adjudication.

In ruling in the company's favour, the Court found that, on a true reading of the agreement, the legal costs referred to were the costs of the threatened court proceedings, not those of the adjudication. That interpretation was in line with the principle that costs incurred in adjudications are not generally recoverable.