Grow With Us Ltd. v Green Thumb (UK) Ltd.

A contractual renewal option may be enforceable even though future performance requirements are to be proposed at renewal. Where the clause gives one party power to propose those requirements and the other a choice whether to accept them, the court should not imply a term that the proposal must be reasonable merely because the existing franchise involved substantial investment. Principles permitting reasonable terms to be implied to make an ongoing contract work do not apply where the agreed term has ended and continuation or replacement remains open. The clause was therefore a take-it-or-leave-it renewal mechanism, not an agreement to agree. The court’s observations on the Data Protection Act 1998, including the evidential burden on the party resisting performance, were expressly obiter.

Green Thumb granted Grow With Us a franchise for a fixed term ending on 14 January 2006. The agreement gave the franchisee an option to extend for seven years, subject to accepting uplifted minimum performance requirements or executing a new agreement on the franchisor’s standard terms. The franchisor proposed an increased performance requirement which the franchisee rejected and sought a mandatory injunction requiring an extension on different terms.

HHJ Seymour QC, sitting in the Queen’s Bench Division, rejected the proposed implied term that the uplifted requirements had to be reasonable and held that no extension could be compelled. The appeal concerned the construction and enforceability of the renewal clause and, additionally, whether data-protection objections excused the franchisee’s refusal to provide customer information.

Appeal dismissed. Lord Justice Buxton gave the leading judgment. Lord Justice Maurice Kay agreed, and Sir Martin Nourse agreed with the result and the contract reasoning, adding observations of his own.

1. Clause 4.1.20.5 required the franchisor to propose uplifted minimum performance requirements and left the franchisee to decide whether to accept them. Alternatively, the franchisee could execute a new agreement on the franchisor’s current standard terms. The clause contained no implied requirement that the proposed requirements be reasonable.
2. The principles governing implied terms assist an existing transaction which the parties intended to continue or perform. They do not justify implying terms into a contract which has reached the end of its agreed term, where continuation, replacement and their terms remain open. The court could not impose a market inquiry to formulate performance requirements for the parties.
3. The clause was enforceable on its proper construction. It was not an agreement to agree, although the judge below had been wrong to characterise it in that way. The absence of an accepted proposal meant that the franchisee did not obtain an extension.
4. Obiter: the discussion of data protection did not affect the outcome. Once the contractual obligation to provide the data was established, the evidential burden of proving an excuse lay on the franchisee. Fair processing had to be considered separately from satisfaction of a condition in Schedule 2 to the Data Protection Act 1998. The franchisee was initially the data controller, while the franchisor became a controller on transfer.
5. Obiter: the franchisee failed to show that it could not obtain customer consent or that the agreement prevented it from seeking consent. The legitimate-interests condition did not need to be decided. The court tentatively indicated that “necessary” did not mean essential or unavoidable.

The appeal was dismissed.

• Court of Appeal (Civil Division): [2006] EWCA Civ 1201. Appeal dismissed. The court upheld the result below but held that the renewal clause was enforceable and was not an agreement to agree.
• Queen’s Bench Division: HHJ Seymour QC rejected the proposed implied term requiring reasonable uplifted minimum performance requirements and held that the attempted extension failed for want of certainty as to those requirements.