Back in 2015, the resolution of a British commercial litigation action provided a lesson in how small details can have big importance. The resolution of a $29 million (U.S.) contract dispute hinged upon the interpretation of one single word in the contract. Here in Florida, the difference between success and defeat in commercial litigation actions can similarly mean that millions of dollars may hinge upon just a few words. That’s why, whether you’re negotiating, executing or litigating a commercial contract, it pays to have South Florida commercial litigation counsel who knows how to deliver results.
Here is a case that is just another recent example. In 2016, the owner of several medical centers and health care entities agreed to sell an 80% ownership stake in the corporate entities that controlled those assets. A West Palm Beach-based private investment firm agreed to make the purchase, with the sides agreeing to a purchase price in excess of $100 million. The precise amount was to be calculated based upon a stated multiplier of the seller’s operating business earnings. The contract also laid out a non-judicial mechanism for resolving disputes if there was disagreement about the exact purchase amount.
A dispute did erupt and the seller sued in state court in Miami. The buyer then filed a motion asking the judge to issue an order compelling the two sides to use the non-judicial dispute resolution process stated in the contract. The mechanism in question involved the “designation of a neutral accountant” and the use of certain procedures outlined in the agreement.
The trial judge denied the motion and allowed the seller’s lawsuit to go forward in court.
The profound importance of ‘may’ versus ‘shall’
The buyer appealed but still lost. The difference between success and defeat for each party was a series of small things. First off, the clause that discussed the retention of a neutral accountant and related procedures was preceded by the language “the parties may,” not “the parties shall.” Using “shall” might have given the buyer the unilateral power to force the dispute into non-judicial resolution. However, because the contract said “may,” both sides had to agree to use the non-judicial resolution process, and obviously the seller did not agree to that.
That same paragraph, in a later portion, also contained a clause that said, “If the Accountant is retained…” The use of “if” was another important clue. The inclusion of the words “may” and “if” in the drafting of this contract paragraph pointed strongly toward the non-judicial resolution process being optional and not mandatory.
The use of those words, by themselves, might have been enough to give the seller success in this case. However, there was one more piece that was exceedingly damaging to the buyer’s case, and it was a big thing that looked like a small detail. As the appeals court described it, “buried in the 25th line of the single-spaced provision” in part of Section 1.5(c), the contract explicitly said that an accountant, if retained, was to be considered to be an expert, not an arbitrator. That language, obviously, was devastating for the buyer’s position.
Many areas of the law require an extraordinarily keen attention to detail. Few require much more such attention than commercial contracts. To make sure your business interests and rights are protected, get the attentive legal representation you need. The diligent South Florida commercial litigation attorneys at Stok Kon + Braverman have successfully helping a wide array of commercial litigation clients for a number of years, and are ready to talk to you about your needs.
Contact us online or by calling (954) 237-1777 to schedule your consultation and find out how this firm can help you.