It is common in this age to see commercial contracts containing clauses that regulate the parties’ choice(s) of law, dispute-resolution process, and governing (or prevailing) language. This is because the world today is a global village where the frontiers of trade and commerce have been stretched from one end of the world to another, from one culture to another, from one jurisdiction to another.
As such it is frequent these days to find that parties to a contract are such that they are from different legal systems, subject to distinct laws and court systems. These different systems will sometimes have different dispute-resolution processes, with one legal system more advanced than another. The attitudes of courts would also differ. These are usually clothed as legal risks or uncertainties affecting commercial contracting.
Due to the above, parties engage transaction lawyers who will help them navigate through these issues as a necessity. The trend now is that such lawyers painstakingly spell out clauses that cover these risks. For example, if the parties do not specify the particular law that governs their contract and it is possible that two or more systems of conflicting laws could apply to the contract, courts will look at certain factors to determine which system of law is applicable to the contract.
So also it is with the language applicable to a contract. The language of a contract is an important part of negotiations where there are parties with differing nationalities and official languages. For example where a project agreement is to be entered into between a Nigerian company and a Chinese company, whose individual officers and employees are only knowledgeable in their respective official languages, which language will guide the contract with the purpose of preventing a breakdown of intentions. Language can impact on the contract in terms of the official language applicable to the contract, and the language in which the contract is translated and signed.
|image courtsey slideshare.net|
The power of language will be further appreciated if we consider a case that is now popularly referred to as the ‘two million dollars comma case’ – Rogers Communications v. Bell Aliant. The dispute in 2004 was between Rogers Communications of Toronto and Bell Aliant over the latter’s attempt to cancel a contract governing Rogers’ use of telephone poles. But the argument turned on a single comma in the 14-page contract. The contract was made in Canada’s two official languages – English and French. Both versions of the contract were approved. The disputed clause in the English version of the contract stated as follows: “This agreement shall be effective from the date it is made and shall continue in force for a period of five (5) years from the date it is made, and thereafter for successive five (5) year terms,unless and until terminated by one year prior notice in writing by either party.” Canada’s telecommunications regulator, Radio, Television and Telecommunications Commission, interpreting the clause, ruled that a comma allowed Bell Aliant to end its five-year agreement with Rogers at any time with a 12 months’ notice. On appeal, the Canadian telecoms regulator reversed its decision and took the view that although two interpretations were possible with respect to the English version of the contract, the French version provided clearer language to the effect that the parties intended to restrict any termination without cause to the end of the 5-year term of the agreement.
To avoid million-dollar drafting errors, below are some of the factors that need to be considered in determining the language applicable to (or adopted as official in) a contract will include:
1. The governing law of the contract. If the governing law of the contract for example is English law, then it will make a lot of sense to have the language of the contract in English so as to prevent misinterpretations; so also if the language is in Chinese, the parties would be wise to have the language of the contract be in Chinese or Mandarin (as the case may be). This will certainly help when the contract is being interpreted in times of dispute;
2. The local law of each party will also be considered. Where the local law of any of the parties requires that contracts involving their entities be stated in their local language, negotiations will be skewed in that direction. This is quiet common with government entities. If the local laws of both parties have a local language requirement, then the parties may adopt the approach of having the contract agreed and signed in the two languages. The only problem that may then remain unsolved is which language version will take priority (as we saw in the Rogers’ case how two versions determined a two-million dollars question). At this point, it is possible for parties to agree which takes priority;
3. The place of execution and performance of the contract may also influence the choice of language, such that two entities of different nationalities may adopt language of the place of execution;
4. The language of arbitration (or the language of the place of arbitration) may be chosen as the language of the contract;
5. The language adopted by the parties during the entire process leading up to the drafting of the contract;
6. The legility and comprehensibility of the language being sought by one of the parties can be possible;
7. Where there are judicial decisions applicable to any of the parties upholding a certain position; and
8. Whether it will save time and cost to have a particular language adopted as the language of the contract.
The language of a contract can be conveniently ignored where both parties use the same language. But in a contract involving bilingual or multilingual parties, the language of a contract is a point that should be approached and treated with circumspect. More than anything else, the decision in Rogers v Bell Aliant shows us that a clause in English when referenced with the same clause in French can produce different outcomes-outcomes that may be worth millions and several years of dispute.