Archive for the ‘Implied terms’ Category

Derogation from grant: relevant factors

October 3, 2012

In Platt v London Underground Ltd ([2001] WL 172012) LUL granted a lease of a kiosk to P. The kiosk was in the exit from an underground station. Only people leaving the station through that exit (there was another) would use the kiosk. P claimed that LUL only allowed passengers to use the relevant exit during the morning rush hour and at no other times. Thus, the kiosk was starved of trade. P succeeded in his claim that LUL had acted in derogation from grant.

The surrounding circumstances at the time of the grant were a strong indicator as to what the parties must have had in their mutual contemplation. The kiosk relied on passengers going through the exit as its only source of customers. At the time of the lease, the exit was open for much of the time. This was plainly important to the tenant. There was nothing in the circumstances at the time of the grant or in the communications between the parties, or in the express terms of the lease to indicate that P had accepted a risk that the exit might be closed most of the time. The parties had contemplated that the exit would be part of the station operation during the opening hours of the station. Closure of the exit for much of the time during the lease did amount to a derogation from grant.

Neuberger J. provided some commentary on the law concerning derogation from grant. There is  a ”very substantial degree of overlap, between the obligation not to derogate from grant, the covenant for quiet enjoyment, and a normal implied term in a contract.’ (p. 5)

He endorsed the approach of Bowen L.J. in Myers v. Catteson ((1889) 42 ChD 470 at 481) who said that the aim of the covenant is to give effect to,  ‘the obvious intention of the parties, so as to give the transaction between them a minimum of efficacy and value which upon any view of the case it must have been their common intention that it should have.’

The judgment contains a set of principles concerning non-derogation from grant (pp. 4 – 8). The express terms of the lease and the surrounding circumstances at the date of the lease will be highly relevant in determining whether an act amounts to a derogation from grant. Where the action complained of is the use of the landlord’s retained land, the tenant cannot complain of uses to which the retained land could reasonably be put after the grant of the lease.

‘When assessing what the parties to a contract actually or must have contemplated, one should focus on facts known to both parties and statements and communications between them. A fact which could only have been known to one party could not, save in very unusual circumstances, be a legitimate part of the factual matrix. A thought locked away in the mind of the parties, or even perhaps of both parties, cannot normally be a relevant factor when assessing the parties’ understanding. In English law at any rate, contract is concerned with communication as well as mutuality’.

Derogation from grant: common honesty: giving with one hand and taking away with the other

September 28, 2012

In Johnston & Sons Ltd v Holland ([1988] 1 EGLR 264, CA (Eng)) L granted T a lease of a building but reserved a right to use the flank wall for advertising purposes.  T’s successor in title  later acquired the open land next to the flank wall and erected its own hoarding near the flank wall so as (intentionally) to obscure the flank wall and make it useless for advertising purposes. This was held to be a derogation from the grant made by virtue of the reservation. While the reservation could not prevent T from making use of the open land (including the erection of the blocking hoarding) it could prevent this being done for the purpose of frustrating the purpose underlying the grant:

‘Constructing a building is one thing. Erecting a blocking hoarding for the sole purpose of screening the flank wall or erecting one’s own advertising hoarding for the purpose of effectively taking over the advertising site for oneself is altogether different.’ (Nicholls L.J.)

Landlord’s use of adjoining land making demised property less fit for contemplated purpose

September 25, 2012

In Aldin v Latimer Clark, Muirhead & Co ([1894] 2 Ch 437) a landlord granted a lease of property to be used for the purpose of carrying on the business of a timber merchant. The tenant covenanted not to use the property for any other purpose. The landlord later erected buildings on the neighbouring land retained by him which interfered with the flow of air to the sheds and made them less useful for the tenant’s business. The court held that the right to the flow of air could be an easement but no such easement had been acquired here.

The tenant claimed that this amounted to nuisance, derogation from grant and breach of the covenant for quiet enjoyment. The landlord was liable in damages.

‘[W]here a landlord demises part of his property for carrying on a particular business, he is bound to abstain from doing anything on the remaining portion which would  render the demised premises unfit for carrying on such business in the way in which it is ordinarily carried on, but that this obligation does not extend to special branches of the business which call for extraordinary protection.’ (444 per Stirling J).

Furnished dwelling: implied fit for habitation covenant

February 28, 2012

An implied term that the property is reasonably fit for habitation is implied into a lease of a furnished house.

In Smith v Marrable ((1843) 11 M & W 5, 152 ER 693) S let a furnished house to M for 6 weeks. The house was infested with bugs and M left after a week (paying one week’s rent). The court found that M had been within his rights to repudiate the lease. There had been a clear breach of the term implied into a lease of furnished residential accommodation that it was reasonably fit for habitation.

No implied lease term that premises are fit for any particular purpose

September 30, 2011

Yiktown Properties Ltd v Jeon Bok Sool ([2011] HKEC 1149) concerned a lease of premises intended to be used as a restaurant. The tenant claimed that she could not get a restaurant licence because the toilet facilities were inadequate. The judge declined to rely on the tenant’s evidence in a number of respects. In any event, he referred to authorities establishing the proposition that there is no implied term in a lease that the premises are physically or legally fit for any purpose. He found that there had been no representation or collateral contract to the effect that the premises were fit for use as a restaurant.

Implied long-stop date in agreement for the sale of a Small House

April 1, 2011

There is no room to imply a long-stop date for completion of a conditional agreement where the agreement expressly contemplates uncertainty and the parties have agreed to wait until the condition can be met.

In Wong On Na v Harbour Well Development Limited ([2002] HKEC 2) the plaintiff had agreed to buy a house in the New Territories from the defendant developer. The agreement made completion conditional on getting the necessary Certificate of Compliance from the relevant District Lands Office. The developer completed the building works and sought the certificate. A lengthy delay ensued (through no fault of the developer). The plaintiff sought to rescind and the developer counter-claimed for damages. The plaintiff alleged that there was an implied term that completion was to take place within a reasonable time (see Johnson v Humphrey [1946] 1 All ER 460). This claim failed. The agreement made it clear that the completion date was uncertain and depended on obtaining the certificate. This was outside the developer’s control; it had done all that it could to obtain the certificate. The developer was awarded damages representing the difference between the contract price and the market price at the date of the hearing (the market had fallen).

Implied obligation to give reasonable time to comply with ‘split cheques’ stipulation

March 30, 2011

Where a contract obliges a purchaser to pay with split cheques, the seller has an implied obligation to give the buyer the necessary information early enough to give the buyer reasonable time for compliance. If this time is not given, the buyer may be entitled to rescind. If the seller does not give the information early enough and the contract is not rescinded, time will not be of the essence for completion even where the contract states that it is. The buyer will be allowed a reasonable time to complete.

In Kensland Realty Ltd v Whale View Investment Ltd ([2002] 1 HKLRD 87, CFA) a contract for the sale of land required the buyer to pay with split cheques. The necessary information as to the payees and amounts arrived with less than two hours to go before the deadline for completion. Time was expressed to be of the essence. The buyers arrived six minutes late with the cheques and the seller purported to rescind and forfeit the deposit. The Court of Final Appeal held that the sellers had not complied with an implied obligation to give reasonable time to comply with a split cheques requirement. The buyers had by their conduct elected to keep the contract on foot. Nevertheless, the sellers could not insist on strict compliance with the time for completion. There is a principle that prevents parties to a contract from relying on their own wrong. It can take effect either as a principle of construction or as a substantive rule of law. Here the seller was seeking to rely on its own failure to give adequate time for compliance to allow it to invoke the time of the essence clause. This would not be allowed. Instead, the equitable rule applied. Thus, it was enough for the buyer to show that he had completed the transaction, or been ready to do so, within a reasonable time after the stipulated time. The buyer was entitled to rescind and to damages from the seller.

When is a contractual licence irrevocable? Is an injunction available to restrain unlawful revocation?

February 2, 2011

A contractual licence is not irrevocable simply because there is no express provision concerning revocation. It depends on the intention of the parties. If need be, a term concerning revocation can be implied to give efficacy to the agreement.

Winter Garden Theatre (London) Limited v Millenium Productions Limited ([1948] AC 173, HL) concerned a contractual licence of a theatre. It contained no term that would allow the licensor to revoke it and no stated term date. The licensor gave the licensee one month’s notice to leave the theatre. The licensee sought a declaration that the licensor was not entitled to revoke the licence. The House of Lords held that, on its true construction, the licence was revocable.  It was a case of finding the true construction of the document from its terms and the circumstances underlying the transaction. Obiter, Lord Uthwatt said that an injunction is a possible remedy where there is an attempt to revoke in breach of contract (at 202).