The facts

In June 2022, Weston Homes entered into a contract with Henley Developments (the seller) for the purchase of a freehold property. The contract was conditional on the satisfaction of a number of conditions, including Weston Homes obtaining reserved matters approval. If the conditions were not satisfied by 4 June 2023, the contract provided that either party could serve notice to terminate. If the right to terminate was exercised, under the contract, the seller would be obliged to refund the deposit of £870,000 paid on exchange by Weston Homes.

By 4 June 2023, the planning application made by Weston Homes had not been determined by the local planning authority which meant that the condition was not satisfied on time. As a result, Weston Homes served notice to terminate and claimed repayment of the deposit.

The seller argued that the reason the planning condition was not satisfied by the relevant date was due to Weston Homes' failure to comply with its obligations to procure satisfaction of the condition. The seller's position was that the contract should be construed to prevent Weston Homes from being able to exercise the right to terminate otherwise it would be able to benefit from its own breach of the contract.

Decision

The High Court ruled in favour of Weston Homes, concluding that the contract could be terminated and the deposit should be returned to them.

In its reasoning, the Court expressed that the language of the parties in the contract, particularly in relation to the termination clause, was "clear and entirely unequivocal". The terms of the contract allowed either party to terminate under clearly specified circumstances where the conditions of the contract were not satisfied by a certain date, irrespective of whether the failure to satisfy the conditions was attributable to a contractual breach by the party seeking to terminate.

The Court ruled that, where the circumstances triggering the parties' termination rights under the contract exist and the rights are not caveated in any way, either party should be able to bring the contract to an end.

Practical points

The decision is an important reminder of the need to ensure that the provisions contained in property contracts are clear and unequivocal, particularly in relation to termination provisions. Contract drafting needs to be precise and termination clauses should unambiguously set out the events that trigger the right to terminate. A properly drafted termination clause will help prevent disputes around whether a breach justifies termination or not.