Common use of HELD Clause in Contracts

HELD. The court, referring to clause 3.2 of the MRA, stated that, as per the party’s consensus, the agreement would terminate upon the expiry of the specified rental period. The agreement provided for a minimum rental period of 12 quarters, commencing on 3 December 2013 and terminating on 30 November 2016 (or, at the latest, 2 December 2016). If the court had given effect to the applicant’s contention, then the minimum rental period would have been extended for a further 3 months and terminate on 28 February 2017, thereby constituting almost 13 quarters, as opposed to the agreed 12 quarters. The court stated that giving effect to the applicant’s contention would lead to absurdity. The MRA contained an express provision to the effect that the agreement would terminate after 12 quarters. The court therefore rejected the applicant’s contention that the agreement should constitute almost 13 quarters as this was not the intention of the parties when entering into the agreement. The applicant, in responding to the court’s submissions, argued that the contract period would still be for express 12 quarters and that the interregnum period would be in addition thereto. The court disagreed with the applicant, stating that the applicant’s interpretation of the agreement would lead to an outcome whereby the interregnum rental would be treated as extraneous to the quarterly payments, the effect of which would be to ignore the express wording of clause 3.2, specifying that the rental period would be for 12 quarters commencing on the commencement date. The court, in agreeing with counsel for the respondent, stated that the first payment made by the respondent constituted a quarterly payment, but was adjusted as the period involved was shorter than a quarter. This interpretation was held to be consistent with clause 4.1 of the agreement, which did not distinguish between the first rental payable on the commencement date and the subsequent rentals payable on the rental due date. The applicant responded to the courts averments by arguing that it would lead to absurdity if the commencement date was a matter of days before the rental due date, thus shortening the minimum rental period to just over 11 quarters. The agreement made no provisions for a shortfall of the rental period of 12 quarters. The court suggested that a tacit term be inserted, to the effect that the rental period be extended in order to make up any shortfall, and that a proportionate rental be calculated and paid at the end of the contract to make up the full 12 quarterly payments. The court thus considered the issue of any shortfall as de minimis. The court, in justifying its position, stated that it was required to give the language contained in the agreement its ordinary and grammatical meaning, unless doing so would lead to absurdity, repugnancy or inconsistency with the rest of the agreement. Further, a sensible meaning would take preference over one which would leave insensible or unbusinesslike results which would defeat the purpose of the agreement.