UYCF Ltd v Forrester & Anor

A contractual provision is void for uncertainty only as a last resort. The court must first construe the document according to ordinary principles and identify the obligation the parties intended to impose. This reluctance is particularly strong for leases and conveyances, especially where the agreement has been partly performed. It does not, however, permit the court to invent essential terms or imply a construction inconsistent with the express words or clear intention of the parties. Where a covenant deliberately depends on an absent specification requiring substantial agreement about matters such as size, construction and cost, and no objective yardstick exists, the court cannot fill the gap by imposing a standard of reasonableness.

The defendants appealed against a decision of Slough County Court, where His Honour Judge Holden held that a lease covenant was enforceable and awarded the claimant damages for its breach. The covenant required the lessors to erect a permanent office building in a specified position and in accordance with a specification said to be annexed to the lease. No specification existed.

The claimant had pursued damages after abandoning its claim for specific performance. The defendants sought a declaration that the covenant was void for uncertainty, alternatively rectification or a declaration that it imposed no obligation. The central issue was whether the remaining wording sufficiently identified the parties’ contractual obligation despite the missing specification.

1. Appeal allowed. The judgment awarding the claimant damages was set aside. The covenant in clause 3(2) was declared void for uncertainty and imposed no obligation on the defendants.
2. Per Potter LJ, the court must construe the lease according to ordinary principles before deciding whether the covenant is void. Courts are reluctant to reach that conclusion where parties plainly intended a binding agreement, particularly in relation to leases or conveyances and where there has been partial performance. That principle does not authorise a construction plainly inconsistent with the words used or the parties’ clear intention.
3. The reference to a specification annexed to the lease imported the assumption that a specification existed. The court could not disregard those words on the basis that the parties knew there was no specification. The covenant therefore had to be assessed in the form in which it appeared in the lease.
4. The omission was fundamental. The parties had intended the specification to define the building’s nature and detail through a process requiring agreement and a commercial compromise between the lessee’s requirements and the lessors’ construction costs and investment interests. The most significant omission concerned floor space, including the unresolved question whether the building should be single-storey or two-storey. Other material matters, including construction, materials and finishes, were also left without an objective basis for determination.
5. The distinction between an agreement to agree in the future and an incomplete reference to an existing agreement did not resolve the problem. In either case, essential terms had not been settled in a manner enabling the court to identify the bargain with sufficient certainty. Nor could the court supply the missing terms by applying general notions of reasonableness or vest the decision in the lessor.
6. Thorpe LJ agreed with Potter LJ’s reasons. The claimant was ordered to pay the defendants’ costs, summarily assessed at £11,500.

• Court of Appeal (Civil Division): Appeal from the judgment and order of Slough County Court dated 18 November 1999. Appeal allowed; damages judgment set aside and declaration granted that the covenant was void for uncertainty.