Word of the Week in Law: To the extent that

Word of the Week

I know, I know, “to the extent that” is four words, not one. But the question of what “to the extent that” means in warranty claims has come up in court and merits consideration.

The Case

The case is Zayo Group v Ainger. The Court is the England and Wales High Court (Commercial Court). The decision can be found here.

The case concerned a share purchase agreement (SPA) by which Zayo purchased the entire issued share capital of E Limited (the ‘Company’) from the “Management Vendors” (i.e. the seven defendant managers of the Company). Zayo argued that the defendants had breached the Management Warranties in the SPA and filed a claim against them.

The Clause and Question

Paragraphs 5 and 5.1 of Schedule 6 of the SPA provides:

“5 No Management Vendor shall have any liability in respect of any Management Warranty Claim:

5.1 to the extent that provision or reserve in respect of the liability or other matter giving rise to the claim in question was made in the Accounts, which could be reasonably demonstrated from the audit papers and other books and records of the Group.”

The question for the Court was whether “to the extent that” meant:

1. that any relevant provision made in the accounts (no matter how small or inadequate) would preclude seller liability under the warranty,

or

2. that the exclusion of liability only applied to the amount of the provision (in which case, the seller would have liability under the warranty for the amount by which the actual target company liability exceeded the provision).

As a matter of construction in the particular case in front of him, the judge went with option number 1.

The Reason

In the judge’s own words:

144. Furthermore, the words “to the extent” are perfectly capable of carrying the same meaning as the word “if”, and such a meaning is a natural meaning of those words, and one that accords with commercial common sense and how the provision would have been perceived by the parties or a reasonable person in the position of the parties (i.e. objectively) as at the date the SPA was made (see Arnold v Britton at [19]). The present case is not one of true ambiguity – placed in its documentary, factual and commercial context the meaning of the words is ultimately clear. A reasonable person having all the background knowledge which would have been available to the parties would have understood the parties to be using the language in the contract to mean that if a provision or reserve was made in respect of the liability or other matter giving rise to the claim in question the Vendors would have no liability.

Why it Matters

Perhaps it’s not so obvious why this matters anywhere outside the U.K. But it matters to those of us who work with the English language because it establishes clear criteria not only for interpreting the phrase to the extent that but for interpreting problem phrases in general.

So when the judge claims that “if” is “a natural meaning of those words, and one that accords with commercial common sense and how the provision would have been perceived by the parties or a reasonable person in the position of the parties” what I hear as a translator is timeless advice: “unless context demands otherwise, go with the natural meaning of words. Ask yourself what any reasonable business person would have understood and what the parties intended.”

One of the most common errors I see in translated texts, one that separates professional translators from “bilingual” wannabes, is strict adherence to words without any regard for the intended purpose for which those words were written in that particular way, by those particular contracting parties, in that particular contract and/or business setting. That often results in literal word-for-word translations that make absolutely no sense to the target user (a great example of this is consideration).

What this, and similar decisions, accomplish (in addition to solving the dispute and enforcing the law) is to provide an interpretation framework for those working at the intersection between law and language. And in that sense, this decision knows no borders and is of utmost value to the international legal and language community.

  3 comments for “Word of the Week in Law: To the extent that

  1. Fernando Cuñado
    January 25, 2018 at 4:05 pm

    Great! Thank you so much, Paula. I’ve always thought that in many contract clauses “to the extent that” actually means “when sth. happens”. But “if” also makes sense. We’ve got to talk about this interesting piece of legalese un our blog. Best.

    Like

    • January 27, 2018 at 10:29 am

      Thanks, Fernando! Looking forward to your post. 🙂

      Like

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