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Cracking the Crema egg

The Court of Appeal has decided market practice may be of use in contractual interpretation after all. So what should you do about it? Georgina Squire explains

18 April 2011

Until recently, evidence of custom or market practice has not generally been admissible in assisting contractual interpretation. The Court of Appeal in Thomas Crema v Cenkos Securities plc [2010] EWCA Civ 1444 has taken a different view. It has confirmed that evidence of market practice may be used as an aid to contractual interpretation.

Crema, an investment banker, was engaged by stockbroking firm Cenkos Securities Plc as a sub-broker to find investors for a company called Green Park Ventures Ltd. Crema sought payment of his fee from Cenkos on the basis that he was entitled to it regardless of whether Cenkos had received payment from GPV. This was the point of dispute.

The first instance judge heard evidence from two ‘expert’ witnesses on when a sub-broker would be paid his commission in such circumstances. Neither witness suggested a trade usage or custom. However, the judge accepted that ‘market practice’, which supported the position of Cenkos for...

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