A recent Delaware Court of Chancery decision determined that “words” prevailed over “numbers” when they appear next to each other as contract terms in a manner that is inconsistent and contradictory. In Fetch Interactive Television, LLC v. Touchstream Technologies, Inc., C.A. No. 2017-0637-SG (Del. Ch. Jan. 2, 2019), the court described in extensive detail the claims and counterclaims between parties who had entered into licensing agreements and a sublicense for a patent, amid deteriorating personal and business relationships.
The most noteworthy aspect of this decision is the analysis by the court about how to interpret a deadline provision in the agreement that included a written word, spelling out a number, followed by a different number in parentheses, as follows: “fifteen (30).” Although there are other important aspects of the opinion, for purposes of this short blog post I focus on a provision discussed and analyzed at pages 52 through 55 of the slip opinion which provided that notice of an opportunity to cure a default must be provided, and that the default could be cured, according to the agreement: within “fifteen (30)” days . . ..
After observing the obvious that the terms of the agreement were in conflict to the extent that the written and numerical terms were contradictory, the court found after trial that the record was “devoid of evidence to resolve this ambiguity.”
The court referred to the Delaware version of the Uniform Commercial Code at 6 Del. C. Section 3-114 which provides that “words prevail over numbers.” See footnote 236. The court applied that general rule to the facts of this case to give precedence to the written number. The court reasoned that it’s less likely that a drafting error will occur in a written expression rather than in a numeric one. See pages 52 to 55.
The court also reasoned that the actual amount of time that was given to the opposing party to cure was consistent with the written number as opposed to the numeric representation of the number of days allowed.
An author of a treatise on contract drafting, Ken Adams, provided commentary on the case, and observed that even though the correct “general rule” was applied, this may be a case where principles of interpretation “don’t always work” as they are not infallible and not on the “level of scripture.”
N.B. This post was linked in the Bloomberg Money column by Matt Levine on Jan. 23, 2019.