Brazilian infrastructure company Concessionaria Do Rodoanel Oeste does not have to pay a termination fee for prepaying $895 million in loans and thereby terminating interest rate swap agreements with investment banks Banco Espirito Santo, Caiza Banco de Investimento and Credit Agricole Corporate Investment Bank, a unanimous appeals panel has ruled in rejecting the banks’ argument that the inconsistent use of a hyphen in the swap agreements created ambiguity.

Rodoanel took out $895 million in loans to complete a highway project and hedged them by entering into interest rate swap agreements, a type of derivative, with the banks. Rodoanel decided to pay down the debt before it was due, allowing it to terminate the swap agreements. The banks claimed that Rodoanel owed them a termination fee, called the “Close Out Amount” or “Close-out Amount” in different documents. They said that the differing punctuation created ambiguity about what the term meant, requiring the use of parol evidence in addition to the contracts themselves.

Manhattan Supreme Court Justice Charles Ramos (See Profile) agreed, and allowed the banks to introduce parol evidence. He eventually denied Rodoanel’s motion for summary judgment, holding that the evidence submitted by the banks had raised a question of fact. But the Appellate Division, First Department, reversed in an opinion by Justice Dianne Renwick (See Profile), who wrote that “it is untenable that the parties would have intentionally left a key meaning of their agreements to such vagaries as placement and punctuation.” She added, “Ultimately, this case serves as a reminder that, in a contract containing punctuation marks, the words and not the punctuation guide us in its interpretation. Punctuation is always subordinate to the text and is never allowed to control its meaning.” She was joined by Justices Peter Tom (See Profile), Richard Andrias (See Profile), David Friedman (See Profile) and Karla Moskowitz (See Profile) in Banco Espirito Santo v. Concessionaria Do Rodoanel Oeste, 652013/11.