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What does “close of business” mean?

A recent High Court case* concerned a contractual notice which had to be given by “close of business” on a specified day.  It was sent by fax at around 6 pm on the day in question.  But was that before or after “close of business”?  If the latter, it was too late.  This had important financial consequences for the parties, depending on which of them was right – millions of dollars turned on it.

Although it was not a wine or spirits trade specific case, the decision will be relevant in any commercial situation where a ”close of business” deadline is stipulated.  For example:

if you don’t pay up by close of business on Wednesday, we will wind you up without further notice

if you do not comply with the contract and do X by close of business on 30th November, we will treat the contract as having come to an end.

But what is meant by “close of business”?  And what if the parties are in different businesses, and/or in different places or time zones?

The issue

The parties agreed that the relevant place of business was London.  Lehman argued that “close of business” was 5.00 pm, so the notice was too late.  ExxonMobil argued that it was 7.00 pm in the context of the business in question, so the notice was in time.

The decision

The Judge held that the onus was on Lehman to establish when close of business occurred in the context of the relevant business.  It would surprise many to learn that close of business in the modern commercial banking world was 5pm, and Lehman had failed to put forward any evidence to support its claim on the point.  Lehman had therefore failed to prove that the notice was given too late.  Further, the judge accepted ExxonMobil’s evidence that commercial banks in London close at about 7pm.

The judge saw it as a question of fact.  The onus is on the party who argues for a particular time to prove that close of business is generally regarded as occurring at about that time in that place and in that type of business.

Moral

If you stipulate a “close of business” deadline, you may face an argument down the road about when exactly that deadline fell.  Instead of using that expression when setting a deadline, it may be better:

  1. to specify a fixed time or window; and
  2. to state the applicable time zone.

*Lehman Brothers International (Europe) (In administration) v Exxonmobil Financial Services BV  (High Court, October 2016)