Businesses who contract for the sale and purchase of commercial assets are reminded to ensure all contractual terms are clear and unambiguous to minimise the risk of a dispute. The award-winning commercial lawyers at ParrisWhittaker are specialists in supporting businesses when negotiating and drafting effective contract terms – and when problems arise.
A noteworthy ruling from the Court of Appeal in the UK followed an unsuccessful claim for ‘unjust enrichment’. Unfortunately, the buyers under a contract never received some of the assets for which they had paid – but were not able to recover the relevant proportion of the purchase price.
Unjust enrichment arises when the recipient of money or assets has been unjustly enriched at the expense of the claimant who made the transfer. The successful claimant is entitled to claim restitution.
In this case1, the key question for the court related to what circumstance a claim in unjust enrichment may succeed in the context of the parties’ contractual allocation of risk under a valid, subsisting contract.
What’s the background?
Two buyers entered into a share sale agreement for the purchase of shares at a purchase price which was stated to represent payment for the shares – as well as an advance for shares in other companies.
However, although the full purchase price was paid in the sum of US$950 million, the tranche of shares in the other company were never actually transferred to the buyers. They then brought a claim for unjust enrichment and sought the return of the US$82.5 million, the sum representing the element of the purchase price attributed to those shares not yet transferred
The Court of Appeal ruled against the buyer. It found that although the parties had intended to apply the purchase price in part to assets other than the shares in the company, the share sale agreement had not referred to them. This was a deliberate omission and rectification was not, therefore, a viable option.
On the facts, the parties had fulfilled their contractual obligations and the seller was under no obligation to transfer the other assets. The judge said: “There is no scope for the law of unjust enrichment to intervene by reference to a basis which is not only alternative and extraneous, but which also directly contradicts the express contractual terms.”
What does this mean?
This ruling is a further demonstration of the court’s clear approach to the interpretation of clear and unambiguous contractual terms. If there was any ambiguity in the terms, the buyers may have been able to argue the case successfully. However, the court found the wording to be clear and deliberate.
Great care must be exercised when negotiating your contract terms. In the case of a dispute, legal principles such as unjust enrichment cannot be relied on to override express contractual obligations.
Contact the expert commercial lawyers at ParrisWhittaker for robust advice and representation as early as possible.
