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Contractual Over-Complexity Can Lead to Trouble

Intricate commercial relationships frequently spawn equally complex contractual arrangements. However, as one Court of Appeal case illustrated, imperfect drafting can lead to difficulties where the order of precedence of different agreements is unclear and their terms apparently conflict.

A dispute arose following the breakdown of a business relationship concerning the placement of medical malpractice insurance on the Italian market. The parties had defined their relationship by signing a terms of business agreement (the ToBA) and, about six months later, a framework agreement (the FA).

The FA provided that disputes would be resolved under the aegis of Italian law and that any arbitration would take place in Milan. However, the ToBA stated that English law would apply and that disagreements should be determined by the English courts. In those circumstances, uncertainty arose as to whether the ToBA and the FA took effect as stand-alone agreements or whether the former had been superseded by the latter.

In accepting jurisdiction to consider the matter, a judge found that the ToBA had survived the signing of the FA and had continued in existence. In upholding that decision, the Court commented on the poor drafting of the FA but found that the two agreements were ‘not part of one package’. The parties had chosen to have different jurisdictions to deal with different aspects of their relationship.