By way of diversion from the long-running story around acceptable and unacceptable tax avoidance, I thought I would raise the the subject of clarity in documents that have important legal consequences for the parties involved.
I have been drawn to this subject through my more than passing interest in all things Arsenal. Most Gooners, Koppites and some other football fans with nothing better to do in the dog days of summer have found themselves drawn in to the long-running saga of the Luis Suarez transfer. Aside from the football-related aspects, it’s the contractual point that is interesting.
There appears to be some uncertainty over a key clause. The player’s side feels – or at least felt – that the words of the clause in question compel Liverpool to sell Suarez if an offer of more than £40m is made. There is a variation on this interpretation which is that the £40m-plus offer compels Liverpool not to sell, but to allow the player to talk to the club making the offer and/or enter in to negotiations to sell to the offering club “in good faith”.
Another interpretation is that the clause merely compels Liverpool to inform Suarez of the offer but does not compel it to allow him to speak to the club which made the offer or enter in to negotiations in good faith. Yet another possibility is that the clause isn’t even written in to the contract. Instead, it’s in the form of a verbally expressed “gentleman’s agreement”.
Aside from the unusual use of the word “gentleman” in relation to any interaction between football clubs, their owners, players and especially their agents, it beggars belief that something so apparently important may not have even been reduced to writing – clear or otherwise. Then again nothing would surprise you in the world of modern football.
I will not go in to the role of parole evidence and intention in interpreting contracts, though Suarez may yet choose to. If he does, he would be recommended to consider using specialist lawyers for a view as opposed to his agent or the head of the PFA. There have been no developments on this front at the time of writing, but this may change.
If you favour either of the first two interpretations, especially the first one, then you would make an offer of just enough to trigger the outcome you are seeking wouldn’t you? An offer of, say, £40m plus £1. Now who would do that? Or why would you not? After all, if the stated price of an item is £40 why would you offer £55 or anything more than £40? Unless, of course, you wished to be considered “classy” by the seller?
How the buyer gets to know about a supposedly private clause – that the seller persists in talking about and which is openly talked about on Sky sports way before the offer is made – is a separate matter that we won’t go in to. If the justification for a higher price is that a similar, say, Welsh item had sold for more than double the amount offered for your item, maybe a valid response is that the said Welsh item was seriously overvalued by, say, the Spanish purchaser who may well live to regret the excessive expenditure. But I digress.
Regardless of the state of affairs in the Suarez dispute at the time you read this article, non-lawyers will express disbelief that there isn’t clarity over such an important clause in a contract. However, lawyers and those with legal training will know that a lack of clarity in a legal document is completely believable regardless of whether such a lack of clarity, or even a written clause, exists in the Suarez contract.
We at Technical Connection have seen many trusts and wills where it is far from clear what the effect or outcome of a clause should be. The intention may have been clear but the articulation is less than perfect.
It’s not just private documents that suffer from a lack of clarity. Legislation also suffers from a divergence in what is stated by the words from what Parliament’s intention was, which is why so many avoidance schemes have been successful. They have worked to achieve an outcome that wasn’t intended by Parliament but was not prevented by the mere words of the legislation. That’s why we have had a steady flow of litigation involving HM Revenue and Customs attempting to secure a “purposive” interpretation of legislation in the courts and tribunals that is less than the strictly formal legal interpretation. And the General Anti-Abuse Rule that will operate, broadly speaking, to apply the intention of Parliament in cases where there has been abuse, as defined within the GAAR.
The lesson coming from the Suarez case is one that anyone involved in composing the terms of a private trust, will or any other legal document would do well to observe. Ensure that what you mean to achieve is expressed clearly by the words of the legal document you are to use. Clear in a way that is beyond confusion.
Setting out a plain English intention before using the necessary legal words in the document as a kind of “recital” or “narrative” may also be helpful – if only to concentrate the mind on the job at hand. It will save a lot of trouble down the track.
Tony Wickenden in joint managing director of Technical Connection
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