|A New Zealand corporation entered into a contract with a Japanese businessman, owner of all the shares of a business for planned development of a golf course in New Zealand, for the purchase of all these shares. The contract contained a clause according to which the payment of the last installment of the price was subject to the condition precedent that the purchaser obtains “all necessary authorizations or resource consents” for the development within a given period of time.
A dispute arose when the New Zealand corporation refused to pay the last installment on the ground that not all authorizations to which the contract clause referred had been obtained. The Japanese seller insisted on a literal interpretation of the contract clause and maintained that the condition precedent envisaged therein had been fulfilled.
The Court admitted that a liberal interpretation, taking into account the parties’ intention, the context of the clause and its commercial objective, would lead to a decision in favour of the New Zealand buyer. It also conceded that such a liberal interpretation would be in accordance with Article 8 of the United Nations Convention on International Contracts for the Sale of Goods (CISG), in force in New Zealand, as well as with Arts. 4.1 to 4.3 of the UNIDROIT Principles which it described as a “document which is in the nature of a restatement of the commercial contract law of the world [and which] refines and expands the principles contained in the United Nations Convention”. However, while admitting that it would be desirable for the courts in New Zealand to bring the law in line with these international instruments, it ultimately opted for a literal interpretation of the contract clause on the ground that the Privy Council in London would not permit it to do otherwise, given that England had not yet adopted CISG and English common law was against liberal interpretations of contracts.