In the current economic climate, parties are reviewing contracts that they consider onerous in the hope of finding loopholes that will enable them to escape from commitments. In Gregory Projects (Halifax) Ltd v Tenpin (Halifax) Ltd [2009] EWHC 2639 (Ch); [2009] PLSCS 291, a prospective tenant entered into an agreement for lease that was conditional on the satisfaction of various conditions before the end date set by the agreement.
One such condition was that the landlord had to obtain planning permission for development. The contract required it to send a copy to the tenant when it was received. The tenant had 10 working days in which to approve the permission and, if the permission was unacceptable, it was entitled to rescind. Unfortunately, the landlord omitted to send the tenant a copy of the permission with its letter confirming that planning permission had been obtained free from unacceptable conditions.
In the current economic climate, parties are reviewing contracts that they consider onerous in the hope of finding loopholes that will enable them to escape from commitments. In Gregory Projects (Halifax) Ltd v Tenpin (Halifax) Ltd [2009] EWHC 2639 (Ch); [2009] PLSCS 291, a prospective tenant entered into an agreement for lease that was conditional on the satisfaction of various conditions before the end date set by the agreement. One such condition was that the landlord had to obtain planning permission for development. The contract required it to send a copy to the tenant when it was received. The tenant had 10 working days in which to approve the permission and, if the permission was unacceptable, it was entitled to rescind. Unfortunately, the landlord omitted to send the tenant a copy of the permission with its letter confirming that planning permission had been obtained free from unacceptable conditions. When the end date passed, several months later, the tenant tried to rescind the agreement. It claimed that the landlord’s failure to observe the procedural steps set out in the contract meant that the planning condition had not been fully satisfied. The judge disagreed. He dismissed the tenant’s argument that it was unable to declare the contract unconditional without seeing the permission. The tenant was told that a decision had been made and that it could have asked the landlord for a copy or inspected it at the council’s offices. The contractual provisions requiring the landlord to provide the tenant with a copy of the permission were mere machinery and were irrelevant to the issue of whether satisfactory planning permission had been granted. The judge asked what the position would have been had the landlord sent the tenant a copy of the planning permission and the tenant had declared it to be unsatisfactory. If, as a result of the dispute-resolution procedure adopted by the parties, the permission was subsequently declared to be satisfactory, when would the planning condition have been satisfied? On the date of the grant of permission? When the tenant wrongly gave notice that the condition had not been fulfilled? Ten working days after the tenant received a copy of the permission? Or when the dispute was determined? The judge noted that the agreement for lease included provisions postponing the end date in the event of a third-party challenge, but not in the case of a dispute between the parties. He therefore decided that the permission was an acceptable planning permission from the date of its grant. What mattered was whether such a permission had been granted; it was not necessary for any dispute over its acceptability to have been initiated or concluded before the end date. In recent market conditions, it has become essential to double-check drafting and to ensure that parties adhere strictly to contract machinery. In good times, parties are usually keen to complete agreements they have made. In difficult times, they may seize on an oversight to try to escape from unwanted contractual obligations. Allyson Colby is a property law consultant
