NOTES OF CASES
| Published date | 01 July 1977 |
| DOI | http://doi.org/10.1111/j.1468-2230.1977.tb02437.x |
| Date | 01 July 1977 |
NOTES
OF
CASES
RULES
AND
PRINCIPLES
AT
THE
WAREHOUSE
ON
its face the recent decision of the Court of Appeal in
Amalga-
mated Investment and Property
Co.
Ltd.
v.
John Walker and Sons
Ltd.
might appear to be singularly unhelpful. For, not only does the
court decline to consider whether
Solle
v.
Butcher
is consistent with
Bell
v.
Lever Brothers Ltd.,3
but also it assumes that the doctrine of
frustration applies to contracts for the sale of land.4 Despite its
unpromising appearance the case provides evidence of four impor-
tant ideas that lie underneath the veneer
of
the rules of mistake and
frustration: (1) the Intention Principle (the intentions of the con-
tracting parties ought to be respected)5;
(2)
the Distress Principle
(the court ought to aim for a resolution of the dispute which will
minimise the distress as between the parties);
(3)
the Security Prin-
ciple (the primary obligations of contracts ought not to be un-
scrambled unless there are compelling reasons for
so
doing)
6;
and
(4)
the Consistency Principle (the established rules of law ought to be
applied).’ The facts of
Amalgamated Investment
were thus. The
defendants advertised for sale-“ for occupation
or
redevelopment
”
-a
site on which stood a large warehouse. On July
18,
1973,
the
plaintiffs offered
&1,710,000
for the site
8;
the following day, the offer
1
[1976] 3
All
E.R. 509; [1977]
1
W.L.R. 164.
2
[1950]
1
K.B.
671.
3
[1932]
A.C.
161.
4
On the first point
see
[1976]
3
All
E.R.
509,
516C
and 519G; on the second
point see
ibfd.
at pp. 516H and 518J.
5
We might wish to reduce this principle to the principle that promises ought
to
be kept.
If
so,
we might argue that the denial
of
an innocent contracting party’s-
disappointed promisee’s-claim is a denial
of
his rights.
Cf.
n.
7.
6
What is the relationship between the Security Principle and the Intention Prin-
ciple?; do they not cover similar ground? Theoretically there
is
no overlap
between the principles for the Security Principle is limited to those cases where the
parties have no intention on the question
of
unscrambling.
So,
where the parties
intend that in the given situation the primary obligations
of
the contract should be
unscrambled, the Security Principle does not bite: either because the intention
of
the parties constitutes a
“
compelling reason
”
under the proviso to the principle;
or,
because “unscrambling” is defined in such a way as to exclude release by
virtue
of
the contractual intention. Unfortunately, practice does not mirror the
sharp theoretical division as between intention and no intention; there is a grey zone
of
intention. Here the relationship between the two principles becomes
less
clear-cut,
for the courts can operate either the Intention Principle (in a speculative manner)
or
inrer
ah
the Security Principle; and, where the Intention Principle is used, the
Security Principle may well be
a
background influence.
The existence of
rules
of
law generates expectations-sometimes underwritten
by the
rules
of
precedent-and thus creates rights.
So,
where the established legal
:ule
is for the enforcement
of
contractual promises, the disappointed promisee can
press his rights at a number of different levels (under the promise itself, under the
legal rule protecting the promise,
or
under the
rule
of
precedent protecting the legal
rule).
No
doubt different levels are more
or
less
appropriate
vis-&vis
the courts
and the contract-breaker.
In fact this offer was made by the plaintiffs in conjunction with another com-
pany, Gladdings. The contract was taken in the name of the plaintiffs.
467
468
THE
MODERN
LAW
REVIEW
[Vol.
40
was accepted subject to contract. On September
25,
1973, the con-
tract was signed. However, the very next day, the defendants were
notified that the property was about to be listed as being of special
architectural or historic intere~t.~
In
fact the property was listed on
September 27, 1973. With this brake
on
the property’s potential for
redevelopment, the value of the site was but a fraction of the con-
tract price.
lo
The question was whether the plaintiffs could escape
from their contractual obligations. IThey argued two doctrines, com-
mon mistake and frustration, neither of which succeeded before
Plowman V.-C.’’ The plaintiffs appealed.
Common
mistake
The plaintiffs asserted that at the time
of
the contract the parties
mistakenly
“
believed that the property was suitable for and capable
of being redeveloped.”
12
The argument was not that the property
was listed before the contract but that the building’s unconditional
selection for listing on August
22,
1973, undercut the common
assumption that the property was
“
ripe for development.”
l3
Although the Court of Appeal was clear that this argument must
fail its reasoning is not easy to identify. It does not for instance
hang its refutation of the plaintiffs’ argument on the tempting peg of
Bell
v.
Lever Brothers Ltd.l‘ nor for that matter on any recognisably
rule-shaped peg. Since the judgments do not turn upon rules their
pattern can be traced out only at the level of those principles which
underpin the rules. Here, the judgments of Buckley
L.
J.
and Sir John
Pennycuick-Lawton
L.
J.3
judgment does not deal with the question
of mistake-seem implicitly to adopt the Intention Princi~1e.l~
9
Pursuant to
s.
54
of
the Town and Country Planning Act
1971.
10
Plowman
V.-C.
found as a fact that the value
of
the property,
so
long as its
redevelopment was barred by the listing, was a mere
E200,OOO.
11
See
[I9761
3
All
E.R.
509, 514.
Plowman
V.-C.
appears to have tackled the
dispute with the Intention Principle uppermost in his mind. This is particularly
clear in his discussion of the frustration point:
“
In my judgment the plaintiffs
took the risk
under the Contract,
and it seems to me impossible to maintain that
the contract ceased to apply when the property was listed. They could have pro-
vided against the risk by an appropriate provision in the contract, but they did
not do
so”
(emphasis supplied)
ibid.,
at
p.
514
G.
Although this construction
of
contractual silence runs in the language
of
the Intention Principle, the possibi-
lity
that
it was ghost-written by the Security Principle cannot be discounted.
Cf.
n.
6.
12
Ibid.
at p.
515C.
l3
Ibid.
at pp.
515B
and
519C
and
D.
14
At
[1932]
A.C.
161, 224,
Lord Atkin said
:
“
A
buys a roadside garage business
from
B
abutting on a public thoroughfare:
unknown
to A, but known to
B,
it has
already been decided to construct a by-pass road which will divert substantially the
whole of the traffic from passing A’s garage. Again A has no remedy. [This ap-
parently unjust ruling] can be supported on the ground that it is
of
paramount im-
portance that contracts should be observed
.
.
.”
This well-known example exposes
the vulnerability of the plaintiffs’ case, for Lord Atkin’s illustration concerns an
analogous situation save only for the vendor’s knowledge
of
the planning decision;
and this difference surely serves only
to
weaken even further the claim in
Amalga-
mated Investment.
Not surprisingly then the plaintiffs in
Amalgamated Znvestment
relied upon the more congenial
Solle
v.
Butcher
line of authority, see
[1976]
3
AIC
E.R.
509,
515A.
Although the judgments do not say explicitly that the parties intended the
risk of unconditional selection to fall on the plaintiffs, it is suggested that this is
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