When is “close of business”?

Agreements and legal documents will often say that something has to be done by “close of business”, but, in the days of internet shopping and 24/7 supermarkets what does this actually mean? And will it always mean the same thing?

Two contrasting decisions of the English and Irish courts show how different approaches can be taken when interpreting the same phrase – and how this can have significant consequences for the parties involved. 

The Irish view

Back in March 2016, the Irish Supreme Court considered a case involving a demand letter issued to a company by Irish Bank Resolution Corporation Limited stating that, unless payment was received by “close of business” on 17 February 2012, the bank would enforce its security. When payment was not received by 4pm on the deadline day, the bank executed a deed to appoint a receiver. That deed was dated 17 February 2012 at 4pm. The company argued that the appointment of the receiver was invalid as it had taken place before close of business and therefore before the time for payment had passed.

But the Irish Supreme Court disagreed and held that the banking business day ends when the relevant bank ceases to do banking business with its customers. For the Irish Bank Resolution Corporation Limited, this was 4pm and therefore “close of business” in the bank’s demand letter meant 4pm.

The view from London

But later in 2016 a decision of the English High Court suggested the working day may be a little longer in London.

In this case, Lehman Brothers and Exxonmobil disagreed about when a default valuation notice had been served under a sale and repurchase agreement. A provision in the agreement stated that any notice which was received “after close of business on the date of receipt or on a day which is not a day on which commercial banks are open for business” would be treated as being given at the opening of business on the next working day.

The default valuation notice was received by fax at 6.02pm but was that before or after “close of business”? The court held that the notice was received before close of business, agreeing with Exxonmobil’s expert who said that, as a rough approximation, in the modern world commercial banks close at about 7pm.

Who was right?

Not only does this show how different countries view the business day for banks, it shows that leaving the precise meaning of “close of business” open to interpretation is risky and can result in a costly legal battle. It is better to state a specific time by which a particular event must happen, rather than leaving this to the whim of a judge interpreting an imprecise phrase.