When is 'close of business'?
The phrase ‘close of business’ is used by many on a regular basis however, when is ‘close of business’?
The recent case of Lehman Brothers International (Europe) (in administration) v Exxonmobil Financial Services BV  considered this issue and the interpretation of the term.
The case concerned the timing of the issue of a notice under a sale and purchase agreement. Lehman went into administration on 15 September 2008 at which time, there was an outstanding sale and purchase agreement with Exxonmobil. In terms of the sale and purchase agreement, this particular notice (a default valuation notice) had to be served by “close of business on the fifth dealing day after the event of default occurred”. The default valuation notice was served by fax, received at Lehman’s office at 6:02pm on 22 September 2008. Lehman argued that ‘close of business’ should be interpreted as meaning 5pm and the notice was thereby invalid. Exxonmobil contended that ‘close of business’ for a commercial bank based in London would reasonably mean 7pm and the notice had therefore been properly served.
It was held that if the parties had intended a strict cut off of 5pm, this should have been expressly stipulated in the sale and purchase agreement. The onus was therefore on Lehman to prove that ‘close of business’ should mean 5pm. Lehman argued that this pointed towards normal business hours. However, the court agreed with Exxonmobil that in the modern world, commercial banks close at about 7pm and the notice was thereby valid.
This case emphasises that the term ‘close of business’ does not have a fixed legal meaning and it may vary depending upon the nature of the agreement and the parties involved. The term ‘close of business’ is generally used when flexibility is required. The term may make it clear that the task/action will be done/performed that day, but by no particular time.
If you have any concerns about any current contract or terms of business or any contracts you are contemplating entering into, please do not hesitate to contact Kirstin Ejsmont or Graham Jones who would be more than happy to review any contractual documentation and advise accordingly on 01224 632464.