› Ambiguous terms in informal commercial agreements
Contracts
› Construction
› Objective commercial purpose of share purchase agreement
Contracts
› Implied terms
› Obligation to pay liabilities within a reasonable time — BP Refinery test
Contracts
› Implied terms
› Good faith and business efficacy — Burger King v Hungry Jack's
Quick Take
1A clause in a share purchase agreement by which the vendor accepts 'full responsibility of all liabilities previously to the completion of sale' and the purchaser has 'zero accountability' for those liabilities, properly construed in its commercial context, imposes a positive obligation on the vendor to discharge those liabilities, not merely an indemnity against personal liability of the purchaser.
2Where a contract imposes an obligation but specifies no time for performance, a term requiring performance within a reasonable time will be implied where the BP Refinery (Westernport) conditions are satisfied — here, without such an implied term the purchaser's contractual protection against pre-existing liabilities would be valueless because the company would likely become insolvent.
3The commercial purpose of the agreement — assessed objectively by reference to the parties' known circumstances including the company's unprofitability and dependence on the vendor's financial support — was critical to resolving the constructional choice between competing interpretations of the disputed clause.
