9. Directory and mandatory provisions

A contract may contain provisions that are directory or permissive, rather than mandatory. Directory provisions may merely suggest how a thing could or should be done, and non-compliance may not be fatal. In Friends Life Ltd v Siemens Hearing Instruments Ltd [2014] EWCA Civ 382 the court discussed various examples of such clauses and, inter alia, Yates Building Company Ltd v RJ Pulleyn (York) Ltd [1976] 1 EGLR 157 which concerned an option to buy land. The option clause provided:

“The option hereby granted shall be exercisable by notice in writing given by or on behalf of Yates to Pulleyns or to Pulleyns' solicitors at any time between April 6 1973 and May 6 1973 such notice to be sent by registered or recorded delivery post to the registered office of Pulleyns or the offices of their said solicitors.”

Notice was given in time, but it was sent by ordinary post rather than by registered or recorded delivery post. This court held that the notice was nevertheless valid. The critical words to be construed were “to be sent by registered or recorded delivery post”. The question was whether those words were indicative or imperative. Lord Denning MR said:

“The option is an offer: an irrevocable offer. When a person makes an offer, he does sometimes prescribe the method by which it is to be accepted. If he prescribes it in terms which are mandatory or obligatory, the acceptance is only good if it complies with the stated requirements. Thus in the present case the notice of acceptance must be in writing, and must be given to Pulleyns or to Pulleyns' solicitors, and must be given between April 6 1973 and May 6 1973. But the question is whether the words “such notice to be sent by registered or recorded delivery post” are mandatory or directory. That test is used by lawyers in the construction of statutory instruments, but it can also be used in the construction of other documents. The distinction is this: a mandatory provision must be fulfilled exactly according to the letter, whereas a directory provision is satisfied if it is in substance according to the general intent.”

Whether a contract term conveys an obligation or merely a direction depends not on the language alone, but on the context and business sense.

10. Inconsistent provisions

It is not expected that lengthy contracts will necessarily be internally consistent. Hombourg Houtimport BV v Agrosin Private Ltd (The Starsin) [2003] UKHL 12 involved a cargo ship that had carried timber and plywood pursuant to contracts of carriage contained in or evidenced by a series of bills of lading of which the respondent claimants ("the cargo owners") on different dates became the holders. The ship was at the time of the voyage on time charter to CPS, which subsequently became insolvent. A representative bill of lading contained on its front a box with the printed head "Signature" in which were the typed words "as agent for [CPS] (the carrier)" and the rubber stamp of CPS's port agents. On the back of the bill, in very small print, were set out a number of conditions implying that other entities may be the ship owners and demise charterers . Due to negligent stowage, the parcels deteriorated during the voyage. The cargo owners claimed damages against the defendants, the owners and demise charterers of the ship ("the shipowners"). The judge held that the bills of lading were charterer's bills and that CPS had been the contractual carrier. The Court of Appeal by a majority held that the bills were shipowner's bills and that the shipowners were the contractual carriers, entitling the cargo owners to sue them in contract in respect of any recoverable loss.

The House of Lords held that greater weight should attach to terms of a contract specially chosen by the parties than to standard printed conditions and, since the bills of lading contained a clear and unambiguous statement on their face that the cargo owners' contracts were made with CPS as sole carrier, they were charterer's bills notwithstanding contrary indications in the standard small print clauses. The court noted that:

“it has long been recognised by very distinguished commercial judges that to seek perfect consistency and economy of draftsmanship in a complex form of contract which has evolved over many years is to pursue a chimera... The court must of course construe the whole instrument before it in its factual context, and cannot ignore the terms of the contract. But it must seek to give effect to the contract as intended, so as not to frustrate the reasonable expectations of businessmen. If an obviously inappropriate form is used, its language must be adapted to apply to the particular case”.

“It is a well established canon of construction that, where there is inconsistency between the printed terms of a standard form and the terms which the parties have themselves written into the document, the latter should prevail”.

In line with this judgment, a more precise or detailed provision is likely to be given effect in preference to an inconsistent more general or widely expressed provision.