Mendenta Finance Case Highlights Importance of the Written Document

The recent decision in Mendenta Finance Ltd v Hitachi Capital (UK) PLC is another example of the need for contracts to be accurately drafted.

Background

Under the terms of a written commercial contract entered into between the parties, Mendenta referred customers to Hitachi and received commission for doing so. Under the contract customers referred by Mendenta to Hitachi were deemed to be ‘owned’ by Mendenta and so, to reflect that, the contract included terms which restricted the way in which Hitachi could approach those customers.  Hitachi sought to terminate the contract and continue approaching the customers which had previously been referred by Mendenta. Mendenta issued court proceedings and on appeal, among other things, Mendenta argued that:

1. the contract as drafted prevented Hitachi from marketing their products to the customers; and/or
2. the contract should be rectified to prevent Hitachi from marketing their products to the customers; and/or
3. a term should be implied into the contract to prevent Hitachi from approaching the customers in question.

The court decided that the wording of the contract did not prevent Hitachi from marketing their own products and only prevented Hitachi from marketing third party products. The court refused to depart from what the written contract actually said. It also held that the clauses containing such restrictions would be anti-competitive and void in accordance with established law.

What this means for you

Mendenta Finance highlights again that the courts are reluctant to rectify or to imply a term into a commercial contract which has been agreed in the course of business. It also demonstrates the importance the court places on the written commercial agreements.

If you enter into written contracts with other commercial organisations, there is a need to ensure that the terms of that written contract accurately reflect that which was agreed and the intentions of the parties at the time. If something has been agreed verbally, or in passing, this should be recorded in the written agreement.

Omitting the intention of the parties from the contract could have serious consequences affecting the enforceability of that agreement. With a properly drafted commercial contract you can be assured your business interests are protected, there is no ambiguity as to what has been agreed and the intention of the parties is clear, which leaves no room for objection.