April 06 2017

‘Close of Business’ in Commercial Contracts

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‘Close of business’ is a somewhat vague phrase which, though commonly used in a commercial context, has no legal definition. A recent dispute over its meaning has resulted in a judgment that is useful in its approach to the phrase. The specialist commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in successfully representing parties in commercial disputes.

‘Close of business’ is a somewhat vague phrase which, though commonly used in a commercial context, has no legal definition. A recent dispute over its meaning has resulted in a judgment that is useful in its approach to the phrase. The specialist commercial litigation lawyers at Bahamas law firm ParrisWhittaker are highly experienced in successfully representing parties in commercial disputes.

What’s the background?

The case¹, heard in the High Court in London, involved two companies in the financial services sector and a disputed close-out. Under the contract, notices had to be served before ‘close of business’ on the relevant day. One of the parties purported to serve notice on the other at 6.02pm, but the other contractual party argued that this was after close of business.

The resulting dispute centred on the issue of what was the meaning of ‘close of business’. The contractual party serving notice argued that a reasonable person would expect that businesses like the other one would close business at 7pm. However, the counter-argument was that close of business meant 5pm.

What did the court decide?

The High Court ruled that it was for the contractual party receiving the notice to establish when it closed for business. It had failed to do so and could not, therefore, rely on its argument that close of business meant 5pm in the absence of an express term to that effect. The phrase was intended to be a specific cut off time and not a vague, flexible period of time and it should, therefore, have been clearly established by the recipient of the notice.

However, what’s particularly important is the Court’s focus on the type of business concerned. Whilst ‘close of business’ can reasonably be expected to be 7pm for businesses of the type involved in this case, ‘close of business’ can mean something entirely different in other sectors. For instance, ‘close of business’ for a restaurant may be 11pm (or later), and for a factory it could be 4pm.

What’s clear is that in similar disputes, the important factors will be the terms of the contract; the types of business or industry involved; and what is reasonable in the circumstances.

How can we help?

Award-winning Bahamas law firm Parris Whittaker represents the highest standards of commercial litigation. If you have any concerns or are in a dispute involving commercial contract terms, contact the expert commercial litigation lawyers at ParrisWhittaker for specialist advice.

_{1 Lehman Brothers International (Europe) v Exxonmobil Financial Services BV [2016] EWHC 2699}