What does 'close of business' mean?

In almost every industry the question of, “When can I expect to hear from you?” is likely to be asked to some extent. Although answers will vary, one generally accepted response is, “By close of business today.” Certainly, it is a phrase used by all lawyers both nationally and internationally, but what does ‘close of business’ actually mean?

In the High court case Lehman Brothers International (Europe) v ExxonMobil Financial Services BV [2016] EWHC 2699, there was a dispute between these two companies. Lehman Brothers International (Europe) (LBIE) had gone into administration on 15 September 2008. There was an outstanding sale and repurchase agreement between ExxonMobil Financial Services BV (EMFS) and LBIE.

EMFS had, in effect, lent 250 million US dollars to LBIE and LBIE had, in effect, provided collateral to EMFS in the form of a portfolio of securities consisting of equities and bonds. Most of the securities were sold by EMFS by 17/18 September 2008. However, some were not sold and were valued a few days later. The dispute was over the balance of the account but also raised questions over the terms agreed by the parties.

There were numerous issues the court had to consider and one of these was the date on which EMFS had sent a "default valuation notice" under the agreement. The notice in question was received by fax at 6.02 pm on 22 September 2008 at LBIE’s London offices. The question before the court was whether "close of business" in London was earlier than 6.02 pm. EMFS’s case was that close of business was 7.00 pm, therefore the notice arrived on time. LBIE’s case was that close of business was 5.00 pm and therefore the notice was late.

"...a useful term which is used in many different contexts."

Blair J stated that in his opinion, the term “close of business” on a particular day or date is a useful term which is used in many different contexts, including court orders. The present context was the time for receipt of notices in a standard form financial contract. Where the intent of such a contract is to impose a definite cut-off time in this regard, it can do so expressly. So, in LBIE’s case, the proviso could have referred to a communication “received after 5pm on the date of receipt”. The fact the contract does not state a time, and uses the term “close of business” instead, gives a useful flexibility, and should deter arguments based on the precise time of receipt, which may make little commercial sense.

Blair J accepted EMFS’s submission that the onus was on LBIE (as the party alleging that the notice arrived too late), to establish when close of business occurred. LBIE had not produced admissible evidence on when that point in time occurred. Blair J concluded that it was sufficient to decide the point in favour of EMFS.

“Definition is key”

The lesson we can learn from this case is “definition is key”. There is no room for ambiguity when terms are defined. It is not bad practice to over-define; it serves everyone well to be clear and precise, whether it is terms in a contract or the contents of a simple email exchange.


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