Peacock & Anor v Imagine Property Developments Ltd

An option is exercised according to the proper construction of the agreement. A deposit is not a condition precedent merely because the agreement requires payment on exercise; the wording and structure must be considered. A notice is effective if, objectively and in context, it leaves the reasonable recipient in no doubt that the option is being exercised. Contractual rights may be waived, or their enforcement prevented by promissory estoppel, where there is a clear and unequivocal representation intended to affect legal relations and relied upon. A party’s refusal to perform its obligations, following the other party’s valid exercise of an option, may amount to repudiatory breach. Free acceptance of building works may also support restitutionary relief where the recipient had a reasonable opportunity to reject them.

The Claimants owned a development site divided into five plots. The Defendant acquired Plot 5 and held options to acquire Plots 2–4. The parties cooperated in developing the plots out of sequence, including by allowing work on Plot 2 before the option was formally exercised.

The Defendant sent written notice exercising the Plot 2 option on 14 July 2014 without paying the contractual deposit. The Claimants refused to accept the exercise because of a boundary dispute, instructed the Defendant to stop work and later treated the option as terminated. The issues included the validity of the option exercise, waiver and estoppel, repudiatory breach, unjust enrichment, drainage, removal of spoil and damages.

1. Option exercise. Clause 4.1 prescribed written notice as the means of exercising the option. Clause 4.2 required payment of the deposit on exercise, but did not make payment a condition precedent. The contractual wording and structure therefore differed from the arrangement in Hare v Nicholl and were closer to Millichamp v Jones. Non-payment was instead a contractual breach, subject to waiver or estoppel: Samarenko v Dawn Hill House Ltd.
2. The letter of 14 July 2014 was an effective exercise of the option. Applying the objective approach in Mannai Ltd v Eagle Star Assurance Co Ltd, the contractual context, previous correspondence and reference to exercising the option made its meaning sufficiently clear.
3. The Claimants had agreed at the 5 June 2014 meeting that the option could be exercised without a deposit, with the exercise date backdated to December 2013. That agreement constituted waiver and a clear representation satisfying promissory estoppel. The requirements identified in Rickards v Oppenheim and MWB Business Exchange Centres Ltd v Rock Advertising Ltd were met.
4. The Claimants’ refusal to accept the valid exercise and their instruction that the Defendant stop work deprived the Defendant of substantially the whole benefit of the agreement. Applying The Spar Capella and Jaks (UK) Ltd v Cera Investment Bank SA, that conduct was renunciatory and repudiatory.
5. Alternatively, the Claimants had freely accepted the Plot 2 works. They had reasonable opportunities to object or require the Defendant to stop, but acquiesced while both parties proceeded on the assumption that the option would be exercised. Applying Cobbe v Yeoman’s Row Management Ltd, the Defendant’s work was not gratuitous and retention of the benefit without suitable payment was unjust enrichment.
6. The foul drainage arrangements satisfied the contractual obligation. The temporary storm-water arrangement did not; completing the necessary separate storm drainage remained the Defendant’s responsibility. The claim concerning the unilateral notice failed for lack of proof of actual loss.
7. The Claimants were awarded £216,291.25 for loss of profit and £95,246.15 for being kept out of money, calculated using compound interest at 10 per cent. The alternative unjust-enrichment claim would have succeeded in £152,920.53.