Meaning of ‘shall’
PM Law v Motorplus (Court of Appeal) [2018]
According to a well-known dictionary ‘shall’ means (amongst other things) “expressing an instruction, command, or obligation”. This case revolved around the meaning of the term when used in a contract.
Facts:
PM Law, a law firm, and Motorplus, an insurance intermediary, entered into a contract in 2007 for the referral of personal injury claims. The parties had already been in a contractual relationship, but the evidence suggested that the contract entered into in 2007 was prompted by the then new Solicitors’ Code of Conduct and the need to comply with it.
At issue was clause 1 of the contract, which provided that, in consideration of the payment of referral fees by PM Law, Motorplus “shall refer a quantity of … claims” to PM Law.
The original High Court judgment decided that the wording simply expressed a ‘present intention’ and did not amount to a promise to refer any specific quantity of claims.
Decision:
The Court of Appeal agreed that in spite of use of the word “shall”, the clause did not impose an obligation to refer claims, of whatever quantity. Instead, it merely amounted to “an expression of a present intention”. The Court was not prepared to infer an obligation to refer a ‘reasonable’ quantity of claims.
The Court’s reasoning included the following:
- The clause made no indication of the quantity of claims to be referred in any given period.
- Subsequent provisions provided for the payment of fees on an individual referral and acceptance basis. No other provisions indicated an obligation to refer claims.
- The entering into of the contract had been prompted by the new Solicitors’ Code of Conduct. The terms of the parties’ previous relationship was therefore taken into account as part of the factual matrix. Under the previous contract Motorplus did not guarantee the number of referrals and the number of accepted referrals had fluctuated. The relevant wording had simply said that ‘Motorplus intend to send approximately 100 claims per month’.
- The contract made commercial sense even without an obligation to refer any particular quantity.
- "Shall" is normally used in contracts to express an obligation, but may not always do so. The words used need to be analysed in the context of the contract as a whole and the relevant factual matrix.
- The words ‘shall’ and ‘will’ are often used interchangeably in common English usage but each can, depending upon the context, suggest an obligation or just a present intention.
- Apparently, the convention in drafting English legislation is to avoid the word "shall". The usual alternative is the word "must" which normally denotes a firm obligation.