Sudbrook
Trading Estate v Eggleton
Conclusion: Appeal allowed. Specific performance of contract ordered.
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Facts
The lessor gave the lessee an option to purchase the leased premises. The option stated that the price was to be not less than £12,000 and was to be agreed upon by two valuers, one appointed by each party. The lessee exercised the option to purchase but the lessor refused to appoint a valuer. The lessee sued for specific performance of the option.
The lessor gave the lessee an option to purchase the leased premises. The option stated that the price was to be not less than £12,000 and was to be agreed upon by two valuers, one appointed by each party. The lessee exercised the option to purchase but the lessor refused to appoint a valuer. The lessee sued for specific performance of the option.
Issue
Does the price fixing mechanism in the option indicate that it is merely an agreement to agree or is it a contract with a non-essential term to complete
Does the price fixing mechanism in the option indicate that it is merely an agreement to agree or is it a contract with a non-essential term to complete
Ratio
(Lord Scarman)
The common law has viewed the method of determining the price to be an essential term of the contract. If the method failed, the contract would fail. However, in this case, the parties' intention was to make a contract for a fair price to be ascertained by valuers at the time the option was exercised. The method for fixing the price was a non-essential part of the contract. The court will give effect to the intention and determine a fair price based on the expert evidence of valuers.
The common law has viewed the method of determining the price to be an essential term of the contract. If the method failed, the contract would fail. However, in this case, the parties' intention was to make a contract for a fair price to be ascertained by valuers at the time the option was exercised. The method for fixing the price was a non-essential part of the contract. The court will give effect to the intention and determine a fair price based on the expert evidence of valuers.
Conclusion: Appeal allowed. Specific performance of contract ordered.
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