Little v Courage Ltd
Court of Appeal
Citations:  CLC 164; (1995) 70 P & CR 469;  CLY 3774.
The defendant was a large brewing company that owned several properties. They granted the claimant a five-year lease of a pub by deed. The lease was on the defendant’s non-negotiable standard terms. It also required the claimant to enter into that agreement as a term of the lease. One clause provided the claimant an option to renew the lease for a further five years, on the condition that the parties agree a further business agreement.
At the end of five years, the claimant gave the defendant notice that he wished to renew the lease. The defendant refused, and refused to negotiate a new business plan. The claimant sued for specific performance of the renewal option. The defendant argued that he was not in breach of the option. This was because the parties had not agreed a new business plan. As such, the condition precedent for exercising the option had not been met.
The claimant argued that the option contained an implied term requiring the defendant negotiate or agree on a business plan. The defendant denied that such a term existed. He also argued that if there was such a term, it was void for uncertainty.
- Was there an implied term in the option requiring the parties to negotiate or agree on a new business plan?
- Would an implied term requiring the defendant to negotiate or agree a new business plan be void for uncertainty?
- Could the claimant get specific performance of the option?
The Court of Appeal held in favour of the claimant. There was no implied term requiring the parties to negotiate or agree to a new business plan. If that term had existed, it would be void for uncertainty.
However, the option, properly construed, only made a new business plan a condition precedent of the option if the landlord required the tenant to agree to one. In this case, the defendant did not require the claimant to enter into a new plan. As such, there were no conditions precedent which had not been met, and the claimant could invoke the option. The court granted the claimant specific performance.
This Case is Authority For…
Interpreting and implying contract terms incorporates the doctrine that no man should be allowed to profit from his own wrongdoing. However, this doctrine is limited to cases where a party seeks to take advantage of his own breach of a legal obligation owed to the other party.
Options are unilateral offers forming part of a bilateral contract. It is not normally possible to imply terms into a unilateral offer. This is because this would bind the offeror to an obligation before any contract is formed. However, it is possible to read words into a unilateral offer when interpreting it, so long as this does not place the offeror under a legal obligation that he has not agreed to.
If a contractual term requires a prior condition to be met before it can be used, the other party is not obliged to do anything until that condition is satisfied.
Millet LJ noted that there is no rule of fictional fulfilment of a condition precedent (which exists in some civilian jurisdictions) in English law. He also reiterated the fact that English law will not enforce a duty to negotiate in good faith.
Millet LJ did state that an obligation ‘to use best endeavours’ to achieve some goal (such as obtaining planning permission) would be enforceable. An agreement to use best endeavours to negotiate or agree, by contrast, is equivalent to an agreement to negotiate in good faith.