A reader alerted me to a recent opinion of the High Court of Justice of England and Wales in Lehman Brothers International (Europe) v. ExxonMobil Financial Services BV, [2016] EWHC 2699 (Comm) (here).
At issue was the meaning of the phrase close of business, as used in a notices provision in a contract. ExxonMobil submitted a notice to Lehman’s London offices at 6:02 p.m. on 22 September 2008. Was it timely? Lehman argued that close of business was 5:00 p.m.; ExxonMobil argued that it was 7:00 p.m.
As usual, I don’t care who won that particular argument (ExxonMobil). All I care about is avoiding fights. So the moral of this story is clear: don’t use the phrase close of business in contracts.
Updated 13 December 2017: Behold the following tweet by @cearta:
An exhortation that could have been written with Re Electron Holdings; McCann v Halpin [2013] IEHC 495 https://t.co/2OsGcEuBVR in mind https://t.co/Ru3ikbGKCd
— Eoin O'Dell (@cearta) December 12, 2016
And indeed here – http://www.bailii.org/ew/cases/EWHC/Comm/2016/2699.html
What a blast from the past! ExxonMobil was trying to serve a notice by fax (!) in relation to some repo transactions, in the days after Lehman Brothers filed for bankruptcy. The fax machine it was being sent to was busy (wonder why!): the fax transmission eventually started at 5.54pm and ended 8 minutes later, at 6:02pm. ExxonMobil said it was on time; Lehman said it was too late.
The term at issue “close of business” was not specially negotiated between the parties, it is included in the standard market terms, the Global Master Repurchase Agreement.
Perhaps the lessons here are (a) not to wait until the last minute, but to serve notices in good time; (b) to use another medium, such as email or hand delivery (each has its own strengths and weakness); and (c) to set a specific time, such as 5pm or 7pm or midnight in a particular time zone, rather than a vague concept such as “close of business”.
I suspect you are always going to have fights about whether notices are valid or not, including whether or not they have been delivered on time.