Data

Date:: 30-11-2012
Country:: United Kingdom
Number:: A216/10
Court:: Sheriffdom of Tayside Central and Fife
Parties:: Scotia Homes (South) Ltd. v Mr James Maurice McLean and Mrs Linda Isabella McLean

Keywords

SALES CONTRACT - BETWEEN A SCOTTISH PROPERTY DEVELOPMENT COMPANY AND TWO SCOTTISH INDIVIDUALS - RECOURSE TO THE UNIDROIT PRINCIPLES AS A MEANS OF INTERPRETING APPLICABLE DOMESTIC LAW (SCOTTISH LAW)

CONTRACT INTERPRETATION - WRITTEN CONTRACT CONTAINING A MERGER CLAUSE - USE OF EXTRINSIC EVIDENCE FOR CONTRACT INTERPRETATION NOT PRECLUDED - REFERENCE TO UNIDROIT PRINCIPLES (ART. 2.1.17)

Abstract

A Scottish property development company (hereinafter the “Company”) entered into a contract with two prospective Scottish buyers (hereinafter the “Buyers”) for the sale of an apartment, identified as “Plot 44”, in a building under construction. When construction was finished, Buyers refused to accept the apartment and to pay the agreed price. When the Company brought an action against Buyers for material breach of contract, Buyers argued that the contract was “void from uncertainty” as the mere reference to “Plot 44” did not sufficiently identify the property in question. The Company objected that in the course of negotiations both parties had referred to a “site layout plan” which provided a clear description of “Plot 44”. According to Buyers said “site layout plan” was inadmissible for the interpretation of the contract since not only did the contract contain no mention of it but it contained an “entire agreement clause” which excluded reliance on any document not specifically referred to in the contract. The Company contested this argument on the ground that an “entire agreement clause” only excludes that the terms of a written contract be supplemented or contradicted by evidence of prior statements or agreements but does not preclude the use of such prior statements or agreements to interpret the terms of the contract, and in support of this argument referred to a number of English decisions and to the UNIDROIT Principles of International Commercial Contracts [Article 2.1.17].

Both the Court of First Instance and the Court of Appeal decided in favour of the Company, and with respect to the effects of an “entire agreement clause” expressly adhered to the arguments put forward by the Company.

Fulltext

SHERIFFDOM OF TAYSIDE CENTRAL AND FIFE

A216/10

JUDGMENT OF SHERIFF PRINCIPAL
R A DUNLOP QC

in the cause

SCOTIA HOMES (SOUTH) LIMITED
Pursuers and Respondents

against

MR JAMES MAURICE McLEAN and MRS LINDA ISABELLA McLEAN
Defenders and Appellants

__________________

[...]

KIRKCALDY, 30 November 2012. The Sheriff Principal, having resumed consideration of the cause, refuses the appeal and adheres to the sheriff's interlocutor of 11 January 2012 complained of; certifies the appeal as suitable for the employment of junior counsel; finds the defenders and appellants liable to the pursuers and respondents in the expenses of the appeal; allows an account thereof to be given in and remits the same, when lodged, to the auditor of court to tax and report; remits to the sheriff to proceed as accords.

[...]

Background
[1] The pursuers are property developers and builders. In 2008 they were seeking purchasers for properties within a development known as Langtoun Maltings, Kirkcaldy. At a meeting on 26 January 2008 between Mrs McLean (the second defender) and a representative of the pursuers, Gill Nisbet, Mrs McLean signed a form requesting the pursuers to reserve a specific property on this development and paying a reservation fee. She agreed to pay a deposit of £5,000 when a contract was signed. Thereafter a contract was concluded between the parties for the sale and purchase of that property in terms of missives dated 28 and 31 March 2008.

[2] The property in question was described in the offer to purchase addressed to the pursuers as "that flatted dwellinghouse being Plot 44 of your development at Langtoun Maltings, Kirkcaldy, on the terms and conditions contained in your pro-forma offer annexed." The pro forma offer included various definitions and further descriptions. Clause 1.1 paragraph (o) of the pro forma offer defined "the Plot" as "the dwellinghouse together with any garden ground, car parking space and/or garage pertaining exclusively thereto known by the Plot number specified in the schedule." "The Dwellinghouse" is defined in paragraph (m) as "the dwellinghouse (and garage, if applicable) of the house type specified in the Schedule and shown on the Company's site layout plan (which plan is demonstrative only and may be varied by the Company as circumstances require) erected or to be erected by the Company as part of the Development and where the context so admits or requires such fixtures and fittings therein as are included in the sale."

[3] The Schedule to the pro forma offer specified the plot number as 44 and the house type as "FT 12 (Second Floor)."

[4] It was a matter of agreement between the parties that the "site layout plan" referred to in the definition of "Dwellinghouse" was number 5/14 of process and that at the time that the contract was concluded plot 44 had not yet been constructed.

[5] In due course the pursuers intimated to the defenders that the property had been completed and that the transaction was ready to settle. However the defenders declined to accept the property and in due course the pursuers intimated to them that they were holding them in material breach of contract. They then went on to sell the property to other purchasers and the present action is directed to recovering their loss and damage arising from the defenders' alleged breach of contract.

[6] The defenders took issue with the proposition that they were in breach of contract and advanced two lines of defence (reflected in their fourth and fifth pleas in law) firstly that the missives were "void from uncertainty" and secondly that, in any event, the defenders had been induced to enter into the missives as a result of misrepresentation by the employee of the pursuers that the property in question was a three bedroomed flat whereas in fact it was a two bedroomed flat. On that ground it was contended that the missives should be reduced ope exceptionis.

[7] The sheriff heard proof on these matters and repelled both pleas in law, allowing a proof before answer restricted to quantum. The defenders have now appealed. They have accepted the sheriff's decision in relation to the question of misrepresentation but they continue to argue that the missives are void from uncertainty on the grounds that they do not give an adequate and sufficiently certain description of the property to be purchased. This note addresses that issue only.

Sheriff's decision
[8] In his judgment the sheriff expressed the opinion that, looking merely to the terms of the missives and the site layout plan, "plot 44" was not completely and sufficiently described (paragraph 50). He took the view however that he was entitled to have regard to extrinsic evidence about what was comprised within the description "plot 44". He found in fact (FF8) that at the meeting on 26 January 2008 Gill Nisbet had handed over a plan (no 5/12 of process) which was an architect's drawing showing the proposed layout of plot 44 and that, when read along with this plan and the site layout plan, the missives gave an adequate and sufficiently certain description of the property being purchased (FF14).

[9] At the appeal counsel for the parties helpfully produced written outline submissions to which I refer for their terms.

Submissions for appellants
[10] Counsel for the defenders and appellants took as his starting point the propositions, firstly, that in order to have an enforceable contract there must be agreement on all the essentials necessary to constitute a contract (May & Butcher Ltd v The King Itd [1934] 2KB 17, Gloag on Contract 2nd edn. page 11, McBryde on Contract 3rd edn. paras. 5.19 - 5.20, R&J Dempster Ltd v Motherwell Bridge & Engineering Ltd 1964 SC 308), secondly, that one of the essentials of a contract for the sale of heritage was a definite description of the subjects of sale (Grant v Peter G Gauld & Co 1985 SC 251, Bogie v Forestry Commission 2002 SCLR 278, McClymont v McCubbin 1994 SC 573, NJ&J MacFarlane (Developments) Ltd v MacSween's Trs. 1999 SLT 619, Gretton & Reid Conveyancing 4th edn. para. 4.03 and Halliday Conveyancing 2nd edn. 2/30.28) and, thirdly, that the test as to whether a contract was or was not sufficiently specific was whether or not it was possible to enforce the contract by specific implement (McArthur v Lawson 1877 4R 1134).

[11] Against that background and looking at the matter broadly the primary contention for the appellants was that the sheriff was not entitled to have regard to the plan (5/12 of process) for the purpose of interpreting the missives or of providing a contractual description of the subjects. He offered three reasons for that contention. Firstly he referred to clauses 9 and 14 of the missives which in his submission amounted to an "entire agreement clause" which excluded reliance on any document not specifically referred to in the body of the missives. Clause 9 of the offer provided that:
"The Purchaser acknowledges that none of the visual depictions contained in any sales brochure or any note of materials to be used or any verbal descriptions provided by the Company or the Company's representatives can be relied upon save insofar as they are contained in the Contract. The Company's sales brochures are general illustrations and may be subject to change from time to time and as a result their accuracy is not guaranteed by the Company and is not to be relied upon by the Purchaser."

[12] Clause 14 of the offer provided that:
"It is expressly declared and agreed that the Contract forms the agreement entered into between the Company and the Purchaser and no reliance has been or will be placed by either the Company or the Purchaser in any manner or way whatsoever upon any representation, warranty or undertaking given by or on behalf of either the Company or the Purchaser whether written or verbal which is not specified in or does not form part of the Contract."

[13] In elaborating upon the purpose and effect of an entire agreement clause counsel referred to Inntrepreneur Pub Co (GL) v East Crown Limited 1999 HC 0491O, Exxon Mobil Sales and Supply Corporation v Texaco Limited 2003 EWHC 1964 and Macdonald Estates plc v Regenesis (2005) Dunfermline Limited 2007 SLT 791. In the first of these cases Lightman J described such a clause as constituting "a binding agreement between the parties that the full contractual terms are to be found in the document containing the clause and not elsewhere, and that accordingly any promises or assurances made in the course of the negotiations ..... shall have no contractual force, save insofar as they are reflected and given effect in that document." Counsel recognised that such a clause does not prevent terms being implied on the basis of business efficacy nor does it prevent the court from relying on evidence of the surrounding circumstances as an aid to the interpretation of the contract, however it did prevent a party seeking to imply a term based on representation during the course of the prior negotiations. The plan (5/12 of process) was plainly a representation as to what the subjects would be and was accordingly excluded by the entire agreement clause.

[14] The second reason advanced for the sheriff not being entitled to consider the plan was that reference to prior negotiations as an aid to the interpretation of contracts was excluded. In this regard reference was made to Prenn v Simmonds 1971 1WLR 1381, Investors Compensation Scheme Limited v West Bromwich Building Society (No 1) 1998 1WLR 896 and Chartbrook Limited v Persimmon Homes Limited 2009 1AC 1101. Counsel submitted that the plan had been produced in the course of the parties' discussions about the purchase of the property and that it therefore formed part of the negotiations. It was a statement merely of a possible layout for the property and was not objective evidence as to the meaning of the terms in the missives.

[15] The third reason for excluding consideration of the plan was that, according to its terms, it was declared to be indicative only and was not intended to be a definition of the subjects of the sale or to form part of the contract. It was plainly not intended to have contractual effect and was not intended to bind the pursuers as to property they were to build.

[16] It was further contended that in any event, even if one was entitled to have regard to the plan number 5/12 of process, it did not adequately describe the subjects of sale. There was for example no specification of the elevation of the property and the plan was said merely to be indicative of what the property might look like. Furthermore there was doubt about whether any garden ground, car parking space and/or garage were included in the sale and if so where each was located. The definition of the common parts was also uncertain. In that state of affairs the sheriff's conclusion in paragraph 50 that without this plan the description of the subjects was insufficient ought to prevail.

Submissions for respondents
[17] Counsel for the respondents took as his starting point the proposition that a contract is not void from uncertainty unless it is impossible to give it a meaning. Whether a contract is or is not void from uncertainty is a matter of interpreting its terms according to the ordinary principles of construction and it was the duty of the court to strive to give meaning to what was plainly intended to be a legally binding contract. In support of these propositions reference was made to Lewison Interpretation of Contracts 5th edn., R&J Dempster Ltd v Motherwell Bridge & Engineering Ltd sup.cit., Whitecap Leisure Ltd v John Rundle Ltd 2008 2 Lloyds Rep 216, Brown v Gould 1972 Ch. 53, Whishaw v Stephens 1970 AC 508, R&D Construction Group Ltd v Hallam Land Management Ltd 2009 CSOH 128, Rainy Sky SA v Kookmin Bank 2011 UKSC 50 and Miller Homes Ltd v Frame 2002 SLT 459.

[18] Counsel submitted that, on the face of the productions, the parties entered into what had the appearance of a binding contract and the inference that they intended it to be binding was unavoidable. In those circumstances the duty of the court was to strive to give meaning to it and it should not lightly set it aside. The fact that the sheriff had been able to find a construction which made sense was sufficient basis for rejecting the proposition that the contract was void from uncertainty unless the sheriff's reading of the contract was completely untenable.

[19] Turning to the issue of the admissible materials to which the court could have regard in interpreting the terms of the contract, counsel submitted that the ordinary principles of construction applied. These included the principles enunciated by Lord Hoffman in Investors Compensation Scheme Ltd v West Bromwich Building Society 1998 1 WLR 896 which allowed recourse to the matrix of fact in which the parties contracted, including "absolutely anything which could have affected the way in which the language of the document would have been understood by a reasonable man." This approach had been consistently followed by the House of Lords and then the Supreme Court - see for example Mult-Link Leisure Developments Ltd v North Lanarkshire Council 2010 UKSC 47.

[20] Dealing with the specific propositions advanced by the appellants it was submitted that there was no warrant for the submission that extrinsic evidence of what had passed between the parties was only admissible if it had been communicated with an intention to create legal relations or for the submission that the handing over of the plan (5/12 of process) was part of the negotiations between the parties which would normally be excluded. Evidence of the plan was admissible as evidence of objective fact known to the parties when they contracted, namely what constituted "Plot 44".

[21] Applying the foregoing principles in the context of conveyancing practice counsel submitted that there was nothing unusual about supplementing a description by reference to extrinsic evidence. In support of this proposition reference was made to Gretton & Reid on Conveyancing para. 4.03, Merrick Homes Ltd v Duff 1996 SC 497 and Houldsworth v Gordon Cumming 1910 SC(HL) 49. Particular reliance was placed on the latter authority as supporting the validity of having regard to evidence which may be given, not to modify the contract but to apply it by identifying the thing mentioned in it which requires identification. There was in these authorities therefore clear support for the proposition that the meaning of the words used in the missives to define the subjects of sale could be elucidated by extrinsic evidence and such evidence could include the plan (5/12 of process) - see also Rankine Landownership 4th edn. page 104. Accordingly it mattered not that the plan in question had not been expressly incorporated into the contract.

[22] Counsel further submitted that this was consistent with the approach in England where a plea of voidness for uncertainty in a contract for the sale of heritage could be answered by reference to extrinsic evidence - Lewison para. 8.12 referring to Shardlow v Cotterell (1881-82) LR 20 Ch.D.90 (the continuing authority of which had been accepted in Harewood v Retese 1990 1 WLR 333) and Westvilla Properties v Dow Properties Ltd 2010 EWHC 30 (Ch.). In the latter case the wording in the contract was insufficiently clear but once regard was had to plans the court concluded that, adopting the words of Lord Hoffman, a reasonable person, having all the background knowledge which would have been available to the parties, would have understood the contract to have been referring to the plans in question.

[23] Applying these principles to the sheriff's findings in fact it was submitted that the plan (5/12 of process) was objective evidence known to both parties of what both understood and meant when they used the expression "Plot 44" in the missives as the definition of the subjects of sale. Returning to the submission for the appellants that the plan ought to be viewed as part of the negotiations between the parties, counsel also referred to Chartbrook Ltd v Persimmon Homes Ltd 2009 UKHL 38 and Bank of Scotland v Dunedin Property Investment Co Ltd 1998 SC 657. In the latter case Lord Rodger had indicated that the rule excluding evidence of prior communings as an aid to interpretation had no application when the evidence of the parties' discussions is being considered in order to establish the parties' knowledge of the circumstances with reference to which they used the words in the contract.

[24] Turning to the appellants' argument founded on clauses 9 and 14 of the missives, counsel submitted that clause 9 was irrelevant since the plan (5/12 of process) was neither a "sales brochure" nor "a visual depiction contained in a sales brochure" nor a "verbal description provided by the company or the company's representative". So far as concerns clause 14 counsel accepted that this was an "entire agreement" clause in standard terms but submitted that such a clause did not over-ride the general principles of contractual interpretation. In support of this proposition reference was made to John v Price Waterhouse 2002 EWCA Civ. 899. Counsel sought to distinguish Inntrepreneur Pub Co (GL) v East Crown Limited on the ground that it was concerned with the question whether the full contractual terms were to be found in the relevant document but that it said nothing about whether an entire agreement clause could affect a question of construction of an express term, such as what parties understood each other to mean by the expression "Plot 44". Such a distinction was supported by the Unidroit Principles for International Commercial Contracts and Lewison (page 141) where the author states: "a conventional 'entire contract' clause does not affect the question whether some matter of fact (whether or not in documentary form) is admissible as an aid to the process of construing a contractual document" and was consistent with the approach in Exxon Mobil Sales and Supply Corporation v Texaco Limited (para.27).

Discussion
[25] In my view it is an important starting point for this discussion to notice that the parties have entered into a contract which was plainly intended to have binding effect and in these circumstances I consider that counsel for the respondents was well founded in his submission that the court should strive to give meaning to it if at all possible. The proper limits of such an exercise were a matter of controversy but there was no dispute about the principle that the courts should not be the "destroyers of bargains" - R&J Dempster Ltd v Motherwell Bridge & Engineering Ltd (per Lord President Clyde at page 327-8).

[26] In R&D Construction Group Ltd v Hallam Land Management Ltd the Lord Ordinary stated (at para.39):
"While the courts require legal certainty and do not enforce an agreement if parties have not sufficiently formulated an intention, judges have repeatedly stated the position that where they are satisfied that parties intended to enter into binding obligations they should attempt, so far as is consistent with essential principle and binding precedent, to give effect to the agreement and not be the destroyer of bargains: Hillas and Co Ltd v Arcos Ltd [1932] 147 LT 503, and G Scammell and Nephew Ltd v HC and JG Ouston [1941] AC 251, Lord Wright at p.268. In R & J Dempster Ltd v Motherwell Bridge and Engineering Co Ltd 1964 SC 308, in a passage which appears relevant to the present case, Lord Guthrie (at p.332) stated:
"The object of our law of contract is to facilitate the transactions of commercial men, and not to create obstacles in the way of solving practical problems arising out of the circumstances confronting them, or to expose them to unnecessary pitfalls. I know of no rule of law which prevents men from entering into special agreements to meet the requirements of special circumstances."
More recently Lord Steyn has stressed that, when considering contractual problems, the courts should seek to uphold the reasonable expectations of honest men: G Percy Trentham Ltd v Archital Luxfer Ltd [1993] 1 Lloyd's Rep 25 at p.27, First Energy (UK) Ltd v Hungarian International Bank Ltd [1993] 2 Lloyd's Rep 194 at p.196 and his article, "Contract law: fulfilling the reasonable expectations of honest men" (1997) 113 LQR 433. The yardstick in a commercial contract is the reasonable expectations of sensible businessmen."

[27] In Miller Homes Ltd v Frame this approach was held to be equally applicable in construing missives for the sale of heritage and in my opinion it is the correct approach to adopt in the instant case. Counsel for the appellants conceded that the court should not lightly set aside a contract and must try to make the contract work. In my view that concession was well made given the line of authority referred to.

[28] Against this background it seems to me that the issue in this case is essentially one of the proper interpretation of the contract. There was no issue that in a contract for the sale of heritage there must ordinarily be a definite description of the subjects of sale and that such a description is essential to a valid contract (see Grant v Peter G. Gauld & Co.) but in my opinion, though they are closely connected, that question should not be confused with the question of what is the proper meaning of the words used by the parties in the contract to define the subjects of sale. In the present case the parties have chosen to define the main part of the subjects of sale by the words "Plot 44" and the primary issue in the case is what the parties meant by that expression.

[29] In approaching that question I agree with the submissions of counsel for the respondents that the ordinary principles of construction apply. These principles were enunciated by Lord Hoffman in Investors Compensation Scheme Limited v West Bromwich Building Society (at page 912H ff) and his approach has been followed (albeit with some qualification) in Chartbrook Limited v Persimmon Homes Limited and Mult-Link Leisure Developments Ltd v North Lanarkshire Council and referred to with approval several times in the Inner House. Lord Hoffman summarises the first two principles as follows:
"1. Interpretation is the ascertainment of the meaning which the document would convey to a reasonable person having all the background knowledge which would reasonably have been available to the parties in the situation in which they were at the time of the contract.
2. The background was famously referred to by Lord Wilberforce as "the matrix of fact" but this phrase is, if anything, an understated description of what the background may include. Subject to the requirement that it should have been reasonably available to the parties and to the exception to be mentioned next, it includes absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man."
(The exception referred to in the second paragraph is the exclusion from the admissible background of previous negotiations or declarations of subjective intent.)

[30] In the leading modern Scottish authority of Bank of Scotland v Dunedin Property Investment Co Ltd Lords Kirkwood and Caplan referred to this approach with approval. While in the first instance the Lord President adopted a different approach nevertheless he considered that the court was entitled to be placed in the same position as the parties were at the time of the conclusion of the contract.

[31] This approach has also been adopted by the Inner House in a number of other more recent cases and, as a general proposition therefore, subject to the exception referred to by Lord Hoffman to which I will return, I do not consider that there is anything controversial in admitting extrinsic evidence of the circumstances surrounding the contract as part of the process of interpreting its terms. Specifically I consider that such extrinsic evidence is prima facie admissible to elucidate what the parties meant when they used the expression "Plot 44", which in my view can readily be seen as shorthand for what might have been a more elaborate description of the subjects of sale.

[32] Such an approach is in my view consistent with the decision in Houldsworth v Gordon Cumming the facts of which, if not indistinguishable, are very closely analogous to the facts of the present case. In that case the missives described the subjects of sale as "the estate of Dallas". The purchaser claimed the whole estates of Dallas as held by the seller under his titles but this was resisted on the grounds that the purchaser had been given a plan showing the subjects of sale to comprise a lesser area. That plan was not referred to or incorporated in the missives which followed but the House of Lords held that evidence of the plan was admissible to show that the parties had agreed to the sale of the area shown on the plan. Lord Chancellor Loreburn took the view that evidence about the plan was admissible "not to alter the contract, but to identify its subject". In a passage which seems pertinent to the current issue Lord Kinnear stated (at page 56):
"I concede that the letters specified in the summons make a complete and final contract, and it follows that in accordance with the well-known rule of law the terms therein expressed cannot be contradicted, altered, or added to by oral evidence. But it is just as well settled law that evidence may be given not to modify but to apply the contract by identifying any person or thing mentioned in it which requires identification; and I see no difference in this respect between the admissibility of a map or plan of the estate and that of any other item of evidence, so long as the plan is not used for the purpose of importing additional or different terms, but only to prove the external facts to which the contract relates."

[33] At a later part of his speech Lord Kinnear said (again at page 56):
"The estate therefore, and no other definite property, was offered for sale to the buyer; and the buyer's agent had no other description put before him, and no other materials for defining the estate he was buying except the plan which had been furnished to him for that purpose. If the letters of December 1907 (ie the missives) are read with reference to the facts and circumstances which were, or ought to have been, present at the time to the minds of the agents who wrote them, they constitute, to my mind, a perfectly distinct and unqualified offer and acceptance of the estate of Dallas as delineated on the plan."

[34] This is in effect the approach taken by the sheriff in his treatment of the evidence about the plan (5/12 of process). It is a question whether Houldsworth is affected in any way by for example the decision in Chartbrook Ltd but for present purposes I think counsel for the respondents was well founded in his submission that it is binding precedent in Scotland and in my view it prima facie supports the legitimacy of the sheriff's approach. It is important to emphasise that that approach does not involve an incorporation of the plan into the contract but merely the use of the plan in order to interpret the language used by the parties in the contract. In that circumstance the submission of counsel for the appellants that the handing over of the plan was not intended to bind does not seem to me to be relevant and in any event is not warranted by the approach of Lord Hoffman to which I have already referred.

[35] The next question then is whether that approach is excluded on any of the grounds set out in paragraphs [12] to [15] above. In addressing that question it is important to separate the contentions of the parties on the evidence about the plan from the actual findings in fact made by the sheriff on that matter. While counsel for the appellants characterised the plan as merely indicative of a possible layout for the property it seems to me that the sheriff's view of the matter goes further than that and supports the conclusion that the plan (5/12 of process) showed what was understood by both parties to be built as plot 44. Against that background the first question is whether evidence of the circumstances in which this plan was handed over falls within the rule which excludes from the admissible background "the previous negotiations of the parties and their declarations of subjective intent" (Lord Hoffman's third principle in Investors Compensation Scheme Ltd - at page 913) or, as Lord Hodge put it in Luminar Lava Ignite Ltd v Mama Group plc 2010 CSIH 1 - "The general rule is that the court will not have regard to statements of parties or their agents in the course of the negotiation of a contract as an aid to the construction of the words which the parties use in the final version of the contract which alone expresses their consensus" (para. 39).

[36] As Lord Hodge made clear however the rule is not absolute. In Prenn v Simmonds Lord Wilberforce (pp 1384G-1385A) discussed the basis of the exclusionary rule and stated that the reason for excluding evidence of the exchanges in negotiations was that such evidence was 'unhelpful'. As the Lord President said in Bank of Scotland v Dunedin Property Investment Co Ltd however, the rationale of the rule shows that "it has no application when the evidence of the parties' discussions is being considered, not in order to provide a gloss on the terms of the contract, but rather to establish the parties' knowledge of the circumstances with reference to which they used the words in the contract (my emphasis)." This distinction has been recognised in a number of Inner House authorities since then (including Luminar Lava Ignite Ltd) and in my opinion it is relevant in this case and supports the admissibility of the evidence about the plan (5/12 of process).

[37] In some cases things said and done in the process of negotiation may be part of the "surrounding circumstances" but the fact that that is the context does not in itself render evidence about those surrounding circumstances inadmissible. As I have already noticed, there is clear authority for the proposition that evidence of the factual background to the contract is relevant and admissible where the facts are known to both parties and those facts can cast light on the meaning of the words which the parties used in their contract. There may in some cases be a difficulty in drawing a line between what is permissible and what is impermissible evidence to be led from the pre-contractual material but in my opinion no such difficulty arises in the present case. If one looks at the rationale for the exclusionary rule given by Lord Wilberforce, it does not seem to me that the handing over of the plan can in any real sense be seen as forming part of the parties' negotiations. Rather it is in my view clearly part of the surrounding circumstances about which evidence can legitimately be led and accordingly I reject the submission for the appellants that the sheriff ought to have disregarded the plan because it formed part of pre-contractual negotiations.

[38] I now turn to the second question whether the sheriff ought to have excluded consideration of the plan because of the provisions of clauses 9 and 14 of the missives. In relation to the former I agree with the submissions of counsel for the respondents that clause 9 has no relevance. So far as clause 14 is concerned in my opinion the submissions of counsel for the respondents are to be preferred. In Macdonald Estates plc v Regenesis (2005) Dunfermline Limited the Lord Ordinary took the view that an entire agreement clause did not bar consideration of the surrounding circumstances for the purpose of interpreting the agreement in question. That view is supported by Lewison (page 141 section 3.16) and John v Price Waterhouse. In the latter case Walker LJ held that a conventional "entire contract" clause could not affect the question whether some matter of fact was admissible as an aid to the process of construing a contractual document. These dicta are in no way undermined by what was said in Inntrepreneur Pub Co (GL) v East Crown Limited. The point made in that case was that the existence of an entire agreement clause means that the full contractual terms are to be found in the contract. According to the approach that I have set out above however that is not an issue in this case because it is not suggested that the missives do not set out the full contractual terms. The issue is the meaning of those terms and I find nothing in Inntrepreneur Pub Co (GL) which bears on the question of whether an express term of the contract can or cannot be construed by reference to extrinsic evidence. The situation is thus in my view analogous to the situation in Exxon Mobil Sales and Supply Corporation v Texaco Limited when the court held that an entire agreement clause did not preclude the importation of an implied term, since that term must be taken to have formed part of the contract from its inception. If therefore such a clause does not exclude a consideration of what the express words of the contract imply I agree with counsel for the respondents that it is uncontroversial to conclude that it does not exclude a consideration of what the express words mean. On that approach the contract in this case has always been for the sale and purchase of what was contained in the plan and described as Plot 44. For the sake of completion this approach also addresses the criticism advanced under reference to McArthur v Lawson that a crave for specific implement could not be framed on the basis of the terms of the contract. Once it is clear what is meant by "Plot 44" it seems to me that an order for specific implement could be made in terms which reflect that meaning.

[39] Finally I consider the appellants' proposition that, in any event, even taking account of the plan (5/12 of process) there was still an insufficiently definite description of the subjects of sale. In addressing this question I think that the sheriff was well founded in making a distinction between those matters which went to the heart of the bargain and those which were a matter of detail and which might be determined by the standard of reasonableness, particularly where the contract had been substantially acted upon and the property completed (see sheriff's finding in fact 15 and paragraph [56] of note). An agreement may be complete although it is not worked out in meticulous detail - see for example McBryde on Contract 3rd edn. para.5.13ff. While initially attracted by the proposition that a two dimensional plan was inadequate to describe a three dimensional subject I have come to the view that an absence of any express provision stipulating a dimension for the elevation of the flat is in the circumstances of this case immaterial and a matter of detail. As counsel for the respondents pointed out, the building regulations enjoin a minimum elevation which would provide an objective basis for the implication of a reasonable elevation and in such circumstances it ceases to be impossible to work out what the contract means. Accordingly it cannot be said that on this ground the contract is "void from uncertainty".

[40] Insofar as concerns the other points of criticism made by counsel for the appellants with regard to the provisions referring to garden ground, car parking space and/or garage I agree with the submission of counsel for the respondents that there was no agreement that there was or required to be any garden ground, car parking space and/or garage included in the subjects of sale. It is right to acknowledge that the contract is not well written, no doubt due in part to the fact that it is a pro-forma intended for use in respect of different properties throughout the development, but in my view clause 1.1(m) can be construed as meaning that if, contingently, the development came to be built in such a way that objectively such garden ground, car parking space or garage did at completion "pertain exclusively" to the flat in question then the appellants could require that it be granted to them. Conversely, if it did not, then the appellants could not enforce a claim to such rights as they had not from the start stipulated for them. If, contrary to this view, there is a distinction to be made in relation to car parking, as the sheriff has made, then in my view the same considerations as I have discussed in the preceding paragraph would apply so as to entitle the appellants to a reasonably located car parking space, the contents of which could be supplied by evidence if needed. It should not be forgotten that these matters are being looked at in the context of a plea in law that the missives are void from uncertainty. Given that context, the alternative of holding the whole contract unenforceable and legally meaningless on account of these matters is not one to which in my view the court is driven and it follows that the appellants' submission to that effect should also be rejected.

[41] For all these reasons in my opinion the appellants have failed to demonstrate that the sheriff was not entitled to make finding in fact 14 and finding in fact and law 2 both of which justified the sheriff in repelling the appellants' fourth plea in law. The appeal must therefore be refused. Parties were agreed that the appeal should be certified as suitable for the employment of junior counsel and that expenses should follow success.}}

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