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construction contracts - not used - not relevant?

25 October 2013

Quite often a question comes along that seems so obvious that you presume the courts simply must have dealt with it before. Considering how often you read "not used" in a contract, it is surprising to find out that there is no firm authority regarding the true purpose of this small, commonly-used phrase. What is the consequence? Indeed, the closest we can get to an answer is by looking at general guidance on deletions in standard documents and even then, we must question the difference between that and marking a clause as "not used".

There tends to be two schools of thought when looking at deleted text in a contract - either it can be taken to help imply meaning into the contract or it should not be viewed at all.

The original position was set out in Inglis v Buttery (1878 5R.(HL)), where it was decided that even if it is possible to still read deleted clauses, they will be regarded as having "ceased to exist to all intents and purposes". It was ruled that there was no difference as to whether it was possible to still read the words of the deleted clause or whether they had been absolutely obliterated.

This position evolved until gradually there were cases where the court felt that they did have a right to look at what is struck out of a contract. The case of Baumvoll Manufactur von Scheibler v Gilchrest & Co 1892 1QB 253 gave an opinion on deleted text, that it may be used to resolve the ambiguity of a neighbouring paragraph. This position was followed on many occasions with the courts showing more flexibility as in Wates Construction (London) v Frantham Property (1991 53BLR23). Here, it was ruled that the decision in Inglis v Buttery reflected the general rule, however it was permissible in exceptional circumstances to look at deleted sections.

Despite these two opposing views, they are still, after all, only about deleted text. So we must question whether a clause marked "not used" should fairly be judged in the same way as deletions. As Diplock, J so optimistically put it, in Louis Dreyfus & Cie v Parnaso Cia Naviera SA (the Dominator) 1959 1QB 499 there is "a pleasant diversity of authority on this subject" (on words deleted) and until the court rule on the meaning, effect and consequence of "not used" it remains open to debate ie whether a clause and/or sub-clause marked "not used" has the effect of removing the intended purpose or something else. For example if there is a condition precedent clause or a sub-clause marked "not used" which required a Notice to be given in a set period; is the effect that the right of action is lost if no Notice is given or; is it a Notice can be given outside the set period ?

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