Bound by an estimate?
Bound by an estimate?
A recent case is a stark reminder of how easily a party's actions can reduce a contractual benefit.
The Court of Appeal has held in ING Bank v Ros Roca SA that the correct interpretation of a contractual clause gave ING an entitlement to a fee of €6,700,000 on completion of a capital injection into its customer, Ros Roca. However, communications between ING and Ros Roca, after the date of the agreement but before the fee had to be paid, created a common understanding between ING and Ros Roca that a much lower fee was payable. The contract itself was not varied, but ING was not entitled to rely on the clause to claim its full fee, and was only entitled to a fee of €943,922.44.
The case is an important reminder of the need for care in communications with corporate customers of banks (or indeed parties to contracts in general). Communications between parties may not be intended formally to change the contractual arrangements which are in place, but the can have that effect. Where those communications create a shared assumption as to a factual (or legal) position, and it would be inconsistent with that shared assumption for one party to then seek to rely on its strict contractual rights, that party may not be able to rely on its contractual rights where the other party has acted to his detriment in relying on the shared assumption.
It is not easy to protect against this situation by, for example, amending standard contractual terms. However, some measure of protection can be gained by education of staff on the risks of affecting the legal relationship between the parties even when a contract is not amended.
Lawyers Paul Glass, Julie Simpson Day, Tim Strong
