Commonly known as the “blue pencil rule”, the Court has discretion to delete the void or illegal words contained in a clause within a commercial contract. If the clause still makes sense after these deletions then it will be enforceable. However, to make the clause valid, the Court will not rewrite the clause, or add or substitute words in the clause to make it valid.
This principle was tested and challenged in the recent case of Prophet plc v Huggett  EWCA Civ 1013.
The case – which was originally heard in the High Court – had to determine whether a non-competition clause (i.e. a clause which restricts one party from competing with another) should be interpreted to correspond with the intentions of the parties at the time that the clause was drafted, or whether it should be read literally – which would offer the claimant no protection at all.
Prophet plc is a software developer and supplier for the fresh produce industry. Prophet employed Mr Huggett as its sales manager. He was responsible for developing new business and managing account relationships with Prophet’s customers. Mr Hugget’s employment contract included a clause which restricted him from competing with the business of Prophet for a period of 12 months after the termination of his employment “in any area and in connection with any products in, or on, which he/she was involved whilst employed hereunder.”
Mr Huggett resigned from his employment with Prophet after finding employment with K3 Business Solutions Limited (K3), a software supplier operating in the fresh produce sector and a direct competitor of Prophet.
Prophet sought an injunction preventing Mr Huggett from working for K3 until his 12 month restriction had expired.
Mr Huggett said that the products that he would be selling at K3 would be different to the products that he sold at Prophet, and he was therefore not in breach of his restrictive covenant.
The High Court originally upheld Prophet’s application. It agreed with Mr Huggett that the clause offered Prophet with no protection because no competitor would be selling Prophet’s products; however, the Court held that the clause did not reflect the parties’ true intentions. The Court decided that adding the words “or similar thereto” to the end of the clause would produce a commercially sensible result and would reflect the true intentions of the parties.
Mr Huggett was therefore restricted from working for K3 until the 12 month period had expired. Mr Huggett appealed.
The Court of Appeal allowed his appeal.
The Court of Appeal said that the meaning of the clause was clear and that there was no basis for a different interpretation. Mr Huggett was therefore not in breach of his non-compete restriction by working for K3. In fact, the non-compete restriction was deemed to be useless.
The Court of Appeal concluded that the draftsman had not thought through the detail and the concept of the clause in sufficient detail.
The case is a reminder of the general principle that the Court will not rewrite a clause, or add or substitute words in a clause to make that clause valid.
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