Conditional Contracts: do you have certainty?

Posted by Elizabeth Cooke-Smith on
It is important to ensure that when considering a conditional contract that you instruct experienced legal representation, and are not tempted to rush the drafting.  A recent case has highlighted the importance of eliminating any ambiguity.  In this case, the outcome was decided on the interpretation of a single word; "all".  

Dooba Developments Limited v McLagan Investments Limited 2016 EWHC 2944 (Ch)

A major supermarket chain engaged a developer to acquire land and build a large, new supermarket premises. In the conditions of the contract was a seemingly innocuous sentence“if all the Conditions have not been the longstop date” the contract would be capable of rescission.   When the longstop date arrived only three of the four Conditions had been satisfied so, could the contract be rescinded?

There had been a shift in consumer attitudes towards supermarkets, especially towards gigantic superstores and many were looking to downsize premises, and by the longstop date the supermarket may have been looking for an out.  In any event, they sought to exercise the right to rescind the day after the longstop date on the basis that all of the conditions had not been discharged. 

Any and All

The Court initially found in favour of the supermarket, taking what could be considered a commercially sensible approach to the interpretation of the contract and following the interpretation principles set out in Arnold v Britton [2015] UKSC 36.  The Court decided that ‘all’ in this instance would mean ‘any’.  The conditions had not all been satisfied and so the contract could be rescinded.  This had seemed to be the intention of the parties when entering into the contract however; this decision was overturned on appeal.

All and None

On appeal, a more literal approach was taken and it was decided that ‘all’ did in fact mean that all of the conditions had to be undischarged for the right to rescind to apply.  It was therefore found that because some of the conditions had been discharged then the right to rescind the contract had not arisen; the right to rescind would only arise if none of the conditions had been discharged.  The supermarket was unable to rescind the contract and has been left with premises that it no longer requires and the problems associated with the unsatisfied condition of the contract.

This is a cautionary tale for everyone, whether or not you think the decision is right.  In the hectic, deadline-driven world of development it is important that drafting is not rushed to meet those deadlines and that all potential ambiguity in any legal document is eradicated.  At Blake Morgan we understand the high standards you expect and in response to this case guidance and advice on further safeguards has been sent to all of our solicitors, and we can tell you what it should have said.

If you would like some advice about conditional contracts please contact our team

About the Author

Elizabeth is a Senior Solicitor in our Build Environment Team, specialising in development.

Elizabeth Cooke-Smith
Email Elizabeth
023 8085 7309

View Profile