Hindsight is not always a good thing!

The Court of Appeal has recently found it was not appropriate to apply hindsight and imply a term into a contract merely because it appears to be fair.

Bou-Simon v BGC Brokers LP [2018] concerned the employment of a Broker who was to become a Partner.  He was paid £336,000 under the terms of a loan agreement which provided that it would be repaid from any partnership distributions made to the Broker and that, if the Broker ceased to be a Partner, any unpaid amounts would only be written off if he had served at least four years.

The Broker left employment within four years and the Company claimed the full amount. In response, the Broker sought to rely on earlier drafts of the agreement and on negotiation communications generally, which he claimed did not contain any express repayment obligation on him.  The High Court did not accept this argument and was instead persuaded by the Company’s argument that it was necessary to imply a repayment term into the agreement which made the sum repayable by the Broker.

The Broker appealed this decision and won. The Court of Appeal held that the Broker had never in fact become a Partner and did not have to re-pay the full amount of the loan because there was no term requiring him to do so in the agreement.  The Court ruled that it was not appropriate to imply the re-payment term into the agreement just because it appeared in an earlier draft or because it seemed fair to do so. The correct approach was to consider the surrounding circumstances when the contract was made and, more particularly, the express terms of the agreement itself.

Matthew Howat, Commercial & Dispute Partner, comments:

This case highlights the importance of the express terms within contracts. If a contract is silent on any point then the Courts cannot be relied upon to imply a term simply because it seems right or fair to do so; the parties will be bound by the express terms of the agreement reached. Best practice remains to ensure that a contract is drafted thoughtfully and with care to ensure that it conclusively reflects the specific agreement reached between the parties.

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