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Options
Construction
Planning condition
Hallam Land Management Ltd v UK Coal Mining Ltd
[2002] EWCA Civ 982
The option was conditional upon a planning application being made for development of the Property. Held: This meant the whole, or substantially, the whole of the area covered by the property not just one part of it.
Notices
Rennie v Westbury Homes (Holdings) Ltd
[2007] EWHC 164 (Ch)
This case is relevant to draftspersons wishing to provide for an option period to be extendable on payment of an additional premium.
Facts
An option agreement granted to the developer an option to purchase the land for a period of 10 years, together with a right to extend that period to 15 years. The wording relating to extension of the period read “at any time during the last year of the option period...the intending purchaser may by notice in writing served upon the intending vendor require such period to be extended by 5 years and upon service of such notice and payment...of £20,000, this agreement shall be construed as if the option period was 15 years”.
A few days before the 10-year option period was due to expire, the developer wrote advising that it would shortly be in funds to invoke the 5-year extension and requesting bank details, but the grantor did not reply. On what was thought to be the final day of the 10-year period, the developer obtained details of the grantor's solicitors’ bank account and transferred the money, receipt of which was acknowledged. In fact, the option period had expired one day earlier than the date of transfer of the money and the grantor sought to return the payment in reliance on the fact that the option period had not been validly extended.
Decision
The Court held that the option period had been duly extended. The only express requirements for the notice extending the option period were for it to be in writing and be served on the grantor during the last year of the option period. In addition, the notice had to convey to the recipient that the option period was intended to be extended, and this fell within the Mannai test, i.e. would the notice have been unambiguously understood by the reasonable recipient? Although the focus of the developer's letter was on payment arrangements, there was no doubt that a reasonable recipient would have understood from it that the developer had decided to exercise its right to extend the option period, as it was only in that context that the question of the payment had arisen, and in the absence of any content concerning the mechanics of payment in the agreement itself, the letter had been unequivocal in asking for practical information to implement payment.
Further, on the facts, the clause providing for extension of the option period only obliged the developer to make a further payment of £20,000, and did not specify the timeliness of payment. There was no basis on which to imply a term that payment had to be made within the initial option period, since time had not been made of the essence, the payment terms were sufficiently certain and payment had been made within a reasonable time.
If the option period extension provision had expressly required the additional payment to be made before the initial 10-year option period expired, it is unlikely that the case would have had the same outcome. Further, when drafting an option agreement, it may be desirable to set out the form of notice required to exercise the option (or extend the option period) in order to avoid the doubts that led to the dispute in this case.
Article: “Invalid Notices – No Longer an Option?” by Tamsin Cox, Falcon Chambers – A look at the impact of Mannai in the light of two recent Court of Appeal cases concerning the exercise of options to purchase. (Landlord and Tenant Review, Vol. 11, Issue 1, January/February 2007, p3).
Undue influence
Macklin v Dowsett
[2004] ERWCA Civ 68.
A case where the CA set aside an option agreement applying the principles in Royal Bank of Scotland Plc v Etridge [2002] 2 AC 773.
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