Regalian Properties Plc v London Docklands Development Corp
Citations:  1 WLR 212;  1 All ER 1005; (1995) 11 Const LJ 127;  EG 176; (1995) 92(4) LSG 34;  NPC 139; (1994) 68 P & CR D29.
The defendant owned land which they were hoping to develop. The claimant offered to pay £18.5m for a licence to build on the land as soon as the defendant obtained vacant possession of the various parts. The defendant accepted ‘subject to contract’ and the acquisition of planning permission and market value certificates. The defendant delayed confirming the contract to obtain further architects designs. The parties then mutually agreed to delay further due to a drop in the market which made the deal uneconomic for the claimant.
Subsequently, the parties began renegotiating the price. This caused the deal to fall apart. The parties never formed a formal contract and no development took place. However, the claimant made a claim in restitution for the expenditure they had wasted preparing for the development.
- Was the claimant entitled to recover wasted pre-contractual expenditure?
The High Court held in favour of the defendant. The parties had agreed that the negotiations were purely subject to contract. This meant that any expenditure the claimant incurred was at its own risk and no claim in restitution was possible.
In any case, the court noted that the wasted costs were not accelerated performance of an anticipated contract. They were designed to put the claimant in the position to obtain and then perform the contract. They granted the defendant no benefit. Quantum meruit was inapplicable.
This Case is Authority For…
Where the parties agree that they can pull out of negotiations at any time, they incur expenditure at their own risk.
This case shows that using terminology such as ‘subject to contract’ will often prevent a contract from forming. This language is strong evidence that the parties did not intend to be legally bound by the arrangement until both have signed a written contract.