Scottish Courts take a reasonable approach to implied time limits in commercial contracts

Posted Aug 1, 2018

Lord Clark heard proceedings in the Commercial Court in the Outer House of the Court of Session on an implied term importing a reasonable time restriction for the performance of obligations in a commercial contract. His decision supports the view that the omission of express timescales in connection with the performance of obligations in such contracts will not provide a basis for a party under such an obligation to delay unreasonably in its performance.

On 28 December 2017, Lord Clark issued a judgment in the case of William Burnside (“the pursuer”) v Promontoria (Chestnut) Ltd (“the defender”) in favour of the pursuer.

Background

The case concerned an agreement between a property investor and developer (the pursuer) and a bank with regard to the sale of 26 properties located in the Borders area of Scotland.  The properties were purchased by the pursuer with funding from the bank. The agreement was entered into when the loan became due for repayment.

The terms of the agreement were such that the bank was under an obligation to sell the properties in order to realise capital to repay the loan. The pursuer’s obligations included managing the properties and remitting rental income to the bank in the interim.

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