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‘As soon as reasonably practicable’: does it mean anything?

Commercial contracts often include obligations carrying the qualification “as soon as reasonably practicable”.  A case earlier this month has given some insight into how the courts will interpret and apply such obligations.

The 2008 financial crisis generated a significant amount of litigation, much of it about complicated financial products.  One such case is Goldman Sachs –v- Videocon Global.  The precise details of that dispute, involving a currency swap transaction are not important.  The point of interest, however, is that the Court of Appeal had to consider the impact of a failure by one party to serve a statement setting out details of the calculation of certain charges “as soon as reasonably practicable”.

The paying party argued that, because the statement had not been provided as soon as reasonably practicable, the obligation to pay, which was dependent on the provision of the statement, had never arisen.  The payee, on the other hand, argued that although the statement had indeed been delivered later than was “reasonably practicable” this did not invalidate the statement once it had eventually been delivered.

 

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The Court of Appeal agreed with the payee: even though it had failed to deliver the statement as soon as “reasonably practicable” that did not, in this case, invalidate the statement and the payor was still required to pay.

The usual health warning applies to this Judgment, in that the construction of the meaning of any commercial agreement will be particular to that agreement.  There are, of course, also ways that a clause of this sort could be worded in order to give a real remedy to the payor if it was not complied with.  However the case does provide an insight into how the courts will approach such provisions in commercial agreements and apply commercial common sense to these types of arguments.

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This information is for guidance purposes only and should not be regarded as a substitute for taking legal advice. Please refer to the full General Notices on our website.

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