Using Jargon in Commercial Contracts

A recent High Court case has shown the dangers of including in contracts terminology and jargon which do not have standard industry meanings.

In euNetworks Fiber UK Ltd v Abovenet Communications UK Ltd (21 December 2007), the High Court heard that during the negotiations for the sale of duct and the lease of fibre-optic cable, the parties had used terminology which had no standard industry definition. This led to a dispute between them as to the extent of the duct purchased and the fibre-optic cable leased.

The plaintiff claimed that the purchase and lease was only over part of its London network. It defined this as the “backbone” and not the “mesh”. However, the defendant argued that the lease covered substantially the whole of the plaintiff’s London network with the exception of the “laterals” (the fibred ducts connecting the network to individual properties). It was the use of the words “network”, “backbone”, “mesh” and “laterals” which had led to the confusion. There was also a dispute over the correct maps which should have been physically annexed to the Agreement.

One of the parties admitted that just before executing the contract, it had realised that there were these ambiguities in the agreement. It had not brought these to the other’s attention for fear of jeopardising the deal.

The High Court ruled that the sale of the duct and the lease of the fibre-optic cable extended over substantially the whole of the plaintiff’s London network. It ruled that where there is a defined word or phrase in an agreement, its meaning could not be interpreted by reference to a “private dictionary”.

It is clear from this case that when entering into a contract where the subject matter is highly innovative, the parties must identify and define any terminology and expressions which have no standard industry meaning. This will prevent any confusion between the parties and therefore avoid a costly dispute.