Contracts often state that certain provisions are to prevail over others to the extent of any conflict between them. In many circumstances this will help interpretation. However it is impossible to foresee all eventualities, and different views are possible about, for example, whether competing provisions cover the same ground in different ways, impose different outcomes, can or cannot be reconciled and if so how. Nibulon illustrates how readily this will occur.
- For its part, the buyer argued that the prohibition clause was “in contradiction” of the Licence Obligation and must not be considered.
- The seller believed that it had used its best endeavours to fulfil the Licence Obligation but with the quota restrictions no licence was available, so prohibition must be deemed to have occurred.
- The Board formed the view that the Licence Obligation was absolute and only a total export ban could qualify that obligation.
- On appeal on a point of law under s 69 of the English Arbitration Act, the court found that it was possible to give effect to both the Licence Obligation and the GAFTA prohibition clause.
To reach this conclusion, the court applied guidance by the Court of Appeal in a different export quota case2, affirming that the first task is to see if clauses can sensibly be read together; only if they cannot is there an inconsistency. In Nibulon, the two clauses were not in conflict; but further consideration was needed by the Board about whether the seller’s’ inability to perform was caused by quota restrictions or the authorities’ failure to issue export licences. The Board would then be able to decide whether the seller was protected by the prohibition clause.
In dealing with vexed questions of when one clause should override another, the High Court said
“…It is not enough if one term qualifies or modifies the effect of another; to be inconsistent a term must contradict another term or be in conflict with it, such that effect cannot fairly be given to both clauses”.
Although this conclusion may seem unsurprising, the fact that similar issues had repeatedly to be referred to the higher courts over a relatively short time for clarification indicates how vexed the question of the interaction of different contractual provisions can be.