Commission for the New Towns v Cooper (Great Britain) Ltd
Court of Appeal
Citations:  Ch 259;  2 WLR 677;  2 All ER 929; (1996) 72 P & CR 270;  2 EGLR 113;  CLY 780.
The claimant leased commercial premises to company B. B then assigned the lease to company E. The claimant and E then made four deeds:
- A ‘building works deed’ requiring the claimant to renovate the premises;
- A ‘larger premises’ option, allowing E to give notice to assign the lease to the claimant if they wanted a new lease of larger premises;
- A ‘put’ option, allowing E to give notice to assign the lease to the claimant with proper notice; and
- A ‘side land’ option which allowed E to give notice to acquire a lease in land next to the premises. The ‘side land’ option was time-limited.
The put option, unlike the other deeds, was stated to be personal to E. It would expire if E assigned the lease or left possession of the premises.
E’s business was later acquired by the defendant. With the claimant’s permission, E assigned the lease to the defendant. After the business soured, the defendant wanted to exercise the put option, despite it being personal to E. They decided to fool the claimant into giving them this right by getting them to agree to grant the defendant all of E’s former rights without realising how broad they were.
The defendant had a meeting with the claimant in which they sought assurances that they would have the ‘same rights and benefits under the original documentation as E’. The defendant mentioned the side land option (which had since expired) to lull the claimant into a false sense of security, but never mentioned the put option specifically. The claimant agreed. In the course of later correspondent, the claimant put this in writing. At no point did the claimant realise that the defendant wanted access to the put option.
When the defendant sought to exercise the put option, the claimant argued that they had no right to. The claimant sought rectification of the written agreement to reflect the fact that the parties did not objectively intend it to include the put option. They also argued that the agreement was not binding because the correspondence between the parties was not an ‘exchange of contracts’, and so did not meet the requirements for the disposition of land interests under s.2 of the Law of Property (Miscellaneous Provisions) Act 1989.
- On an objective interpretation of the parties’ agreement, did the claimant grant the defendant the right to exercise the put option?
- Could the written agreement be rectified to reflect the claimant’s understanding of the contract?
- Did the correspondence meet the requirements of the Law of Property (Miscellaneous Provisions) Act 1989?
The Court of Appeal held in favour of the claimant.
- Objectively interpreting the agreement, the put option was not included. Neither the oral agreement nor the later written agreement mentioned it.
- The defendant falsely represented to the claimant that they were interested in the side land option to trick them into entering the contract. Since the defendant’s intention was to mislead the claimant into thinking they were entering into a narrower contract, the contract should be given that narrower meaning. The claimant was therefore entitled to rectification.
- The correspondence was not an exchange of contracts. At most, the correspondence amounted to an offer and acceptance, which is not enough on its own to satisfy s.2.
This Case is Authority For…
Where one party to a contract:
- Intends the other to be mistaken as to its meaning;
- Makes misrepresentations to achieve this effect or to prevent the other from realising their mistake;
- The other party makes the intended mistake; and
- The first party suspects that the other party has made the intended mistake;
the agreement can be rectified. There is no need to show that the mistake was induced by misrepresentation or that the first party knows the other is mistaken.
An ‘exchange of contracts’ under the Law of Property (Miscellaneous Provisions) Act 1989 is an arrangement where each party, believing the other will do the same for the purposes of creating a binding contract, signs a contractual document intended to be a formal document of title and containing all the agreed terms. The parties must also intended that neither will be bound until the documents have been delivered to the other party in an agreed manner.