Have you included a “purpose” in your commercial contract?

A recent Appeal Court case confirms the importance of a contract having a clear purpose in law.   

Without a purpose, one or other of the parties may not get the benefit they were expecting from the agreement.

But how can the purpose of a contract be unclear? It should be fairly obvious you might think, especially if the parties have specified what it is. Well, not necessarily. The Judge in the leading case on this point stated “A person’s purposes are almost always to some extent mixed, and the ordinary principle is that the relevant purpose is the dominant one”.

In other words, Judges will make a distinction between

•  the sole purpose
•  the dominant purpose
•  one of several purposes, all of varying importance.

So, it is easy to see how the parties might end up with something they did not intend, and which one or the other of them did not want.

If you have an important commercial contract in the pipeline, are you sure that you will get what you want out of it? If not, why not get it checked out by Pinney Talfourd’s experienced Company/Commercial team.If you require any further information on different types of business structure or any company and commercial law matter, call 01277 246833. 

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at May 2016.