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ERJ Lovelock v Exportles [1968] 1 Lloyd’s Rep. 163

Contract – Vagueness – Uncertainty – Meaningless Phrases – Arbitration Clause

Facts

ERJ Lovelock Ltd, the buyers agreed to purchase a quantity of timber from the sellers, Exportles, who were a joint stock company dealing in lumber based in Moscow, Russia. The wood was to be bought and exported by Exportles, who were the sole exporter of timber out of Russia at this time. The agreement contained a dispute resolution clause which provided for ‘any dispute to be resolved by arbitration in London and for any other dispute to be resolved by arbitration in Moscow’.

Issues

Which, if any, of the apparently conflicting arbitration clauses were to be considered correct.  Whether or not the agreement was too vague or uncertain to be unenforceable or not.  Whether or not the court could simply disregard the ambiguous clause whilst preserving the rest of the agreement.

Held

The agreement was not void for uncertainty.  The dispute resolution clause in of itself was so vague and ambiguous as to be capable of being considered deprived of meaning. Because it was a meaningless phrase, it would be disregarded by the court. There was therefore no effective arbitration clause at all. Instead the court would then determine the underlying dispute instead. This was possible because the central terms of the agreement themselves were still clear and determinable by the court. The dispute resolution clause was capable of being disregarded without destroying the central obligations of the parties.  As such, the court was capable of, and should ensure that the contract be given effect and upheld as far as possible.


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