One of the principles that underpin our law is that parties should be free to contract on their own terms, with parties of their own choice. Consequently, the courts incline to the view that the parties have, for good commercial reasons, accepted the terms expressly agreed in their contract, and regard it as their task to give effect to the bargain that the parties have actually made.
Chantry Estates (South East) Ltd v Anderson [2008] EWHC 2457 (Ch); [2008] PLSCS 296 illustrates the court’s reluctance to interfere or to rewrite the parties’ bargain in a form that the court thinks just and reasonable, even though a contract is very one-sided. The case concerned an agreement prepared by the developer that gave it an option to buy property at a fixed price. The fee paid for the grant of the option was £1.
On the face of it, the option period was for six months. However, the option period was, in effect, open-ended, because the agreement provided for the extension of the option period to cater for any appeal against the refusal of planning permission and/or challenges to any permission granted (in which case there was no cut off date by which the option must be exercised). Consequently, the option was capable of subsisting for up to 21 years.
The developer did not submit its planning application immediately, and delayed in providing all the requisite supporting material. It subsequently appealed against the local authority’s decision to refuse planning permission, but asked the planning inspectorate to hold the appeal in abeyance. Consequently, the appeal drifted, while the developer made further planning applications for alternative types of development. On securing planning permission for alternative development, the developer exercised the option and withdrew its appeal, which had of course been lodged to keep the option period alive.
The story is all too familiar. Unfortunately, the seller had hoped and, indeed, expected that the transaction would proceed more quickly. He argued that it was not right for the developer to be able to behave in this manner, for it to be able to keep the option period alive and, on obtaining planning permission for something different from the application that was subject to appeal, exercise the option and take his land from him.
However, the court was powerless to intervene. There was no evidence of any misrepresentation, or rectifiable mistake in the agreement, or of any collateral contract, or estoppel that would prevent the developer from relying upon the contractual terms. The only other possibility was that the developer was in breach of an implied obligation to apply for planning permission and pursue an appeal expeditiously, or some other implied term limiting the extendibility of the option in some way. Unfortunately, however, there was no need to imply additional terms into the contract to make it work, and the court was unable to alter the parties’ bargain by selecting from an à la carte menu of possibilities terms that would have been more even-handed for the parties to have agreed.
Allyson Colby is a property law consultant