CREST NICHOLSON v AKARIA INVESTMENTS

Law of contract operates in a world that extends well beyond the niceties of discourse, and in doing so, relies upon certainty of both intention and expression.

In this appeal case, the confused and often assumptive approach to business between a property owner’s asset manager and developer, left the judges with no choice but to re-assess the contracting parties interpretations, in order to establish conclusive judgment.

As part of an ongoing development agreement, the two companies had outlined very specific terms to their arrangement, and which due to their complex nature, commanded considerate specificity.

While the majority of the schedules to the contract were secure and without contention, the subject of rental values remained less certain, due to the poor wording (or at least absent text) within the respondent’s letter.

Much like the ‘elephant in the room’, the discussion around whether unoccupied properties were subject to an expected target rental figure or market-driven rates, was left improperly addressed, while in the letter from the respondents, there was also a tone of trying to set the terms of the contract.

Clause 18.2.1 of the development agreement required that the developers were bound to seek open market occupation of the properties as soon as possible, and that the target rents (as defined in schedule 4 of the agreement) set down by the owners were to be achieved where reasonable.

In addition, clause 19.8.1 stated clearly that where no occupation occurred within an agreed period, the appellants would agree to pay a calculable sum, based upon the open market rent value at the time.

Unfortunately, during the exchange of letter and email, it was implied by the developer that the sum awarded would be based upon the pre-agreed target rent values and not (as was expressed within the above clause) the open market value.

By the appellant explaining that the proposed terms within the letter were ‘acceptable’, it was also argued that they had, by virtue of their response, accepted and agreed to be bound by the principle that the target rent values were those in effect, and not that of any (as yet undeterminable) open market rent rate.

After consideration of the assumptive wording of the letter, it was concluded within the Supreme Court that no reasonable person, including those with inside knowledge of the working arrangement, would have construed that any acceptance was expressed and any offer openly agreed to.

Hence, for those two reasons the appeal was upheld, while the court reminded the parties that:

“An offer is defined as “an expression of willingness to contract on specified terms made with the intention (actual or apparent) that it is to become binding as soon as it is accepted by the person to whom it is addressed.””