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payment bond if it does not pay out on the insolvency of the ship builder? Clearly the intention of all parties must have been for the bond to pay out on the insolvency (as defined in the contract) of Jinse and following a demand from the buyer and therefore such sums in clause 3 could only have sensibly referred to the pre-delivery instalments in clause 3 repayment of which was due to the buyers in accordance with the demands as sent to Jinse. The Court of Appeal said that there could have been any number of reasons why the parties agreed for the bond not to pay out in relation to the insolvency of the ship builder and it was not up to them to second guess what commercial agreements had been reached between the parties. A number of commentators at the time thought the Court of Appeals decision was absurd. Thankfully the Supreme Court have taken a different view (unanimously I might add) and agreed with the first instance judge. They concluded that whilst the clause could be open to the two possible interpretations proffered by the parties, the buyers interpretation of clause 3 was the one that was preferred and it was consistent with the commercial purpose of the bond. Be in no doubt, however, that the drafting of the bonds were ambiguous hence the two possible interpretations but the Supreme Courts unanimous decision is a victory for common business sense which at this time of economic uncertainty is essential in generating confidence in the business arena. Businesses must have confidence that the bargains they make will be upheld in a genuine common sense way by the Courts. Contact: Joe Griffiths, Partner Property Edwin Coe LLP