In the case of Alexander v West Bromwich Mortgage Company Ltd, the Court of Appeal has concluded that an inconsistencies clause in West Bromwich's standard mortgage conditions, which stated that the offer documentation prevailed over the standard mortgage conditions in the event of an inconsistency, resulted in the interest clause in the offer documentation prevailing over that in the standard mortgage conditions.
Alexander took out a buy-to-let tracker mortgage with West Bromwich. The mortgage offer stated that the interest payable would vary in accordance with the Bank of England base rate. The interest clause in the mortgage conditions however allowed West Bromwich to vary the interest rate at different times for different reasons.
Alexander argued that the interest clause in the offer document and the interest clause in the mortgage conditions were inconsistent with one another. The mortgage conditions included a clause which stated that should an inconsistency arise between the offer document and the mortgage conditions, the offer document would prevail. Alexander claimed that the inconsistencies clause meant that the interest clause in the mortgage conditions should not be incorporated into the mortgage contract and that the offer interest rate clause should prevail. The High Court disagreed and found no inconsistency. Alexander appealed.
The Court of Appeal concluded that there was an inconsistency between the two interest clauses and in line with the inconsistencies clause the interest clause in the offer document prevailed over that in the mortgage documents. The Court of Appeal clarified that the interest clause in the mortgage conditions allowed West Bromwich to change the interest rate for a number of reasons. To allow this clause would be to change the mortgage product which was based on following the Bank of England base rate. As a result, the clauses conflicted with one another and the inconsistences clauses was invoked. West Bromwich would not be able to rely on the interest clause in its mortgage conditions.
This case is another stark reminder that clear and consistent drafting is the key to enforceable contractual terms. The lesson here is that when drafting a contract which consists of a combination of 'standard' terms and 'special' terms, that these terms are drafted so that they do not conflict, or if they do (because you cannot amend the standard terms), which set of terms (or individual terms) have precedence. If West Bromwich had wanted the interest clause in its standard mortgage terms to take precedence over the offer document, it should have said so clearly and without ambiguity.