As project finance becomes more widespread in Africa, government officials, bankers and developers will all become exposed to the complex documentation that comes with it. Some of the payment mechanisms can be very complicated and lawyers are often asked to include “worked examples” in the documentation. A recent case looked at the use of worked examples in contracts governed by English law. The court concluded the following:

  • worked examples are integral parts of finance and other commercial contracts;
  • it is often only when narratives and formulae are worked through that their true effect can properly be seen;
  • where there is more than one worked example, consistency among the examples (in this case the inclusion of a missing step), strongly suggests that this was a deliberate choice by the drafter; and
  • it is inherently more probable that the parties’ true bargain is to be found in the worked examples.

Important Takeaways from This Case

  • English law legal drafters should strongly consider including worked examples where complex formulae are used;
  • they should include more than one worked example; and
  • boilerplate construction clauses should be carefully drafted to ensure they do not contribute to any confusion concerning the precedence of worked examples.

One of the issues that the case does not address is that parties in a project financing also often rely on agreed and audited computer models when determining whether or not loans can be drawn or dividends paid. This case gives no guidance on what should happen if that computer model does not accurately reflect the terms of the loan documentation. This issue should be specifically addressed in the relevant documentation.

Case reference: Altera Voyageur Production Ltd v Premier Oil E&P UK Ltd [2020] EWHC 1891 (Comm) (17 July 2020)

If you have any questions concerning the material discussed in this client alert, please contact the following members of our Project Development and Finance Practice:

Steven Gamble                                  +27 823 305 689                    sgamble@cov.com
Graham Vinter                                   +44 20 7067 2062                  gvinter@cov.com

This post can also be found on CovAfrica, the firm’s blog on legal, regulatory, political and economic developments in Africa.