The following post comes to us from Jeffery Roberts, senior partner in the London office of Gibson, Dunn and Crutcher, and is based on a Gibson Dunn alert by Mr. Roberts, Amar K. Madhani, and Gareth Jones.
The UK Court of Appeal recently held in the Belfairs Management case [1] that a warranty in a sale and purchase agreement should be interpreted with regard to all of the background knowledge reasonably available to the parties at the time the agreement was entered into. The decision highlights the growing trend of the UK courts to adopt a more purposive, rather than a literal, approach to the interpretation of contracts under English law in order to give effect to the commercial intentions of the parties where the facts underlying the dispute clearly support such an interpretation and where those commercial intentions are clear. This post provides a short summary of the facts of the Belfairs Management case, as well as a discussion of the potential implications of the decision for buyers, sellers and their advisers.