Cases - Rainy Sky SA and others v Kookmin Bank

Record details

Name
Rainy Sky SA and others v Kookmin Bank
Date
[2011]
Citation
UKSC 50
Keywords
Contracts
Summary

This case arose out of the interpretation of a shipbuilder's refund guarantees given pursuant to 6 shipbuilding contracts in 2007. The builder became insolvent, the buyers cancelled the contracts and then claimed against the guarantees for payments due under the termination provisions.

Clause 2 of the guarantees referred to payments due under the terms of the contracts which would include payments due under the termination provisions.

Clause 3 of the guarantee referred to pre-delivery installments and then guaranteed 'all such sums due to you under the contract'.

The buyers contended that the reference to ‘such sums’ in clause 3 included the sums described in clause 2. The bondsman contended that the reference to ‘such sums’ in clause 3 was limited to the pre-delivery installments referred to previously in clause 3.

In reviewing this case and the issues that it raised the Lord Clarke in the Supreme Court (with whom Lord Phillips, Lord Mance, Lord Kerr and Lord Wilson agreed) concluded that 'where a term of a contract is open to more than one interpretation, it is generally appropriate to adopt the interpretation which is most consistent with business common sense.'

Considering the alternative interpretations to be finely balanced but applying the above principle he found the bondsman liable under the provisions of the bond.