Chantry Estates v Anderson

An implied contractual term is derived by construing the agreement in its relevant factual setting. The court cannot insert a term merely because it would be fairer, more reasonable, or commercially preferable. A term may be implied only where a reasonable addressee would understand that it is the only meaning consistent with the instrument and its background.

An option agreement that operates sensibly without proposed obligations to pursue a planning appeal expeditiously, or to avoid delay, does not require those obligations to be implied. The parties remain bound by the bargain they made, even if it proves disadvantageous to one of them.

The claimants, Chantry Estates, obtained summary judgment for specific performance of an agreement to sell a property. They contended that they had validly exercised an option granted by the defendants under an agreement dated 26 September 2006.

The defendants appealed from Morgan J’s decision, [2008] EWHC 2458 (Ch). Permission was confined to whether terms should be implied into the option agreement requiring Chantry to pursue a planning appeal with reasonable efforts and expedition, and not actively to cause it to remain in abeyance or be delayed.

The issue was whether the contractual definition of the option period necessarily carried any such implied restrictions.

1. Appeal dismissed. Jacob LJ, with whom Jackson LJ and Sedley LJ agreed, held that none of the proposed terms should be implied into the option agreement.

2. Following the construction-based approach to implied terms in Belize Communications Ltd v Belize Telecom Ltd [2009] UKPC 11, implication does not permit a court to improve, supplement, or make a contract more reasonable. The question is what the agreement would convey to a reasonable person with the relevant background knowledge. A term is implied only where it is the only meaning consistent with the agreement read in that context.

3. The agreement did not require Chantry to pursue an appeal with reasonable expedition, or to refrain from taking steps that delayed or kept it in abeyance. It contained an express obligation to act as soon as reasonably practicable only in relation to resubmitting a specified planning application. Its provisions otherwise contemplated further planning applications and required the sellers to assist with them. There was therefore no basis for importing a general duty of expedition.

4. The option machinery worked without the suggested terms. A planning appeal could not in law or practice remain pending indefinitely merely because Chantry sought an abeyance. The contractual structure also did not compel the short option period for which the appellants contended. The court would not alter the parties’ bargain because it might have proved good or bad for either side.

• Court of Appeal (Civil Division): dismissed the defendants’ appeal and upheld the order for specific performance.
• Chancery Division: Morgan J granted summary judgment and ordered specific performance of the contract for sale: [2008] EWHC 2458 (Ch).