Sudbrook Trading Estate Ltd v Eggleton [1983]
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Sudbrook Trading Estate Ltd v Eggleton [1983] 1 AC 444 involved the enforceability of an option clause that allowed lessees to purchase industrial premises upon the expiration of their leases. Each lease contained this option, specifying that the exercise price would be fair and reasonable, determined by a valuer appointed by the lessor.
Upon the expiry of the leases, the lessees sought to exercise the option, but the lessor refused to appoint a valuer, arguing that the option clause was too vague to be enforceable due to the lack of a determined price. The Court of Appeal held that the agreement was an unenforceable agreement to agree, as the court could not compel a party to appoint a valuer.
The House of Lords, upon appeal, allowed the appeal, emphasising that the mechanism for fixing the price was a subsidiary part of the agreement. The lessor's refusal to operate the machinery did not render the agreement unenforceable, as the price was to be fair and reasonable, assessed by applying objective standards.
Lord Diplock emphasised that the refusal to appoint a valuer was a breach of contract by the lessors and, as such, the frustration would be self-induced. English contract law does not allow a party to rely on self-induced frustration to their advantage. Therefore, the lessors were ordered to perform their contractual obligation to convey the premises at a fair and reasonable price.
Lord Fraser highlighted that when an agreement is made to sell at a price to be fixed by a named valuer with special knowledge, the prescribed mode might be regarded as essential. However, in this case, where the machinery consisted of valuers and an umpire without specific names or identification, the court could substitute other machinery to ascertain the price and fulfil the agreement's main purpose.
This case serves as an example of how the courts can proactively address uncertainty in contracts and highlights the importance of clearly stipulating alternative mechanisms for determining price, especially in situations where one party in breach refuses to cooperate.
Upon the expiry of the leases, the lessees sought to exercise the option, but the lessor refused to appoint a valuer, arguing that the option clause was too vague to be enforceable due to the lack of a determined price. The Court of Appeal held that the agreement was an unenforceable agreement to agree, as the court could not compel a party to appoint a valuer.
The House of Lords, upon appeal, allowed the appeal, emphasising that the mechanism for fixing the price was a subsidiary part of the agreement. The lessor's refusal to operate the machinery did not render the agreement unenforceable, as the price was to be fair and reasonable, assessed by applying objective standards.
Lord Diplock emphasised that the refusal to appoint a valuer was a breach of contract by the lessors and, as such, the frustration would be self-induced. English contract law does not allow a party to rely on self-induced frustration to their advantage. Therefore, the lessors were ordered to perform their contractual obligation to convey the premises at a fair and reasonable price.
Lord Fraser highlighted that when an agreement is made to sell at a price to be fixed by a named valuer with special knowledge, the prescribed mode might be regarded as essential. However, in this case, where the machinery consisted of valuers and an umpire without specific names or identification, the court could substitute other machinery to ascertain the price and fulfil the agreement's main purpose.
This case serves as an example of how the courts can proactively address uncertainty in contracts and highlights the importance of clearly stipulating alternative mechanisms for determining price, especially in situations where one party in breach refuses to cooperate.
