Commercial contracts often contain a number of different parts
such as a formal instrument of agreement, schedules returned by the
contractor, general terms and conditions, technical specifications,
key performance indicators, drawings, policies and annexures, etc.
Often, clauses in one part of the contract refer to clauses in
another part (cross-referencing). During the drafting process,
clauses may be inserted into or deleted from parts of the contract.
This may change the clause numbering and cause cross-references to
refer to different clauses than were intended. Alternatively, a
drafter might intend to fill in a blank item in a schedule before
the contract is finalised but then fail to get around to it in the
rush to negotiate and finalise the contract. As a result, the
meaning of the clause referring to that blank item might be
difficult to determine.
For all of these reasons, it is essential that all
cross-references are checked before the contract is entered into.
Despite this being a simple and inexpensive task, contracts are
frequently encountered with cross-references that have not been
checked and are incorrect. Such contracts are confusing and may
lead to costly and time-consuming disputes.
The case of The State of NSW v UXC Limited  NSWSC
530 provides an example of the risk where cross-references in a
contract are not checked. In that case, the NSW Registry of Births,
Deaths and Marriages (Registry) and UXC Limited (UXC) entered into
a contract (Contract) for UXC to replace the Registry's core
computing system. The Contract provided that if a dispute arose, it
was to be referred to an expert for determination.
A dispute arose between the Registry and UXC. The Registry
asserted that UXC breached the Contract, that the Registry had the
right to terminate the Contract, and that it was entitled to a
significant sum of damages. UXC asserted that the Registry did not
have the right to terminate the Contract. The dispute was referred
to an expert for determination. The expert determined that UXC had
breached the Contract, the Registry had a right to terminate the
Contract, and that the appropriate sum of damages was approximately
When the Registry brought proceedings in the Supreme Court of
New South Wales seeking to recover the damages awarded by the
expert, UXC asserted that the award was not binding. The Contract
provided that any expert determination would be final and binding
unless the amount awarded exceeded "the amount specified in
(the) Agreement Details" (Specified Amount). The Agreement
Details did not specify any amount, which was undoubtedly an
oversight by the drafters of the Contract.
UXC asserted that the Specified Amount should be taken to be
either zero (because no amount was specified) or $250,000 (which
was referred to during the tender process as an appropriate amount
but which did not ultimately appear in the schedule). If UXC had
been successful in either assertion, it would have been able to
avoid having to pay the $2.6 million in damages, because the award
would have been non-binding.
Justice Ball found against UXC. He found that because no amount
was specified in the Agreement Details, there was no limit as to
the Specified Amount. In other words, any award of damages made by
an expert would be binding, regardless of the amount of the award,
provided the determination was carried out in accordance with the
Contract. For UXC, this meant that the $2.6 million damages award
This is an interesting decision particularly as it did not
reflect the intention of the parties, which is the usual goal of a
court when attempting to resolve contractual uncertainty or
ambiguity. Clearly, the parties intended that if damages awarded by
an expert exceeded a certain amount, the award should not be
binding. Unfortunately, the Contract did not reflect this on its
face. As a result, the seemingly small omission to insert the
figure '$250,000' into the relevant schedule item had the
effect of causing UXC to be bound by a $2.6 million damages award
where it otherwise would not have been bound.
Checking cross-references and schedules is an extremely
important task which contract drafters must, but often do not,
undertake. As illustrated by the UXC case, failure to undertake
this task may have a significant adverse effect.
This publication is intended as a general overview and
discussion of the subjects dealt with. It is not intended to be,
and should not used as, a substitute for taking legal advice in any
specific situation. DLA Piper Australia will accept no
responsibility for any actions taken or not taken on the basis of
DLA Piper Australia is part of DLA Piper, a global law firm,
operating through various separate and distinct legal entities. For
further information, please refer to www.dlapiper.com
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