Statpro Group v DEPFA Bank

Contractual meaning is determined from the wording of the agreement read as a whole and in its relevant context. Commercial reasonableness and business common sense are background considerations, not starting points for construction. Where agreed contractual periods are expressly defined and inserted into a schedule, the court should give effect to those periods unless the wording clearly provides otherwise. A reference to renewal on each anniversary does not justify replacing an expressly specified subsequent period with shorter annual renewals.

Statpro Group and DEPFA Bank entered into two software licence and support agreements. Each agreement provided for an initial period of two years and a subsequent period of three years. DEPFA gave notices terminating the agreements during the subsequent period.

The parties disputed whether termination could take effect only at the end of the three-year subsequent period, or whether the agreements renewed annually during that period and could be terminated on 90 days’ notice expiring on an anniversary of the renewal date. The claim concerned the interpretation of the termination and renewal clause.

1. Construction of the agreements. The meaning of a contract is determined by examining the written document as a whole and in context, to ascertain what the parties intended by the words used. Questions of reasonableness and commercial sensibility do not initially determine the construction.
2. Specified subsequent period. Clause 4 provided that, on the renewal date, each agreement would renew automatically for the term of the subsequent period specified in Schedule 2. Schedule 2 specified that period as three years. The natural and coherent reading was therefore that each agreement renewed for three years.
3. Meaning of anniversary. The reference to the renewal date and each anniversary created a potential issue concerning the word anniversary, but it was a limited obstacle. It did not justify construing the agreement as providing for annual renewals during the three-year subsequent period. The defendant’s construction was more convoluted and deprived the specified subsequent period of its intended effect.
4. Business common sense. The court did not need to choose between competing constructions by reference to business common sense. In any event, the evidence of commercial practice did not establish an obvious commercial imperative favouring the defendant’s interpretation.
5. The claimant’s interpretation was preferred and an order was made accordingly.

Not stated in the judgment.