Spottiswoode, Ballantyne & Company Ltd v Doreen Appliances Ltd

JurisdictionEngland & Wales
Date1942
CourtCourt of Appeal
[COURT OF APPEAL] SPOTTISWOODE, BALLANTYNE AND COMPANY, LIMITED v. DOREEN APPLIANCES, LIMITED. 1942 Mar. 10, 11. LORD GREENE M.R., MACKINNON and GODDARD L.JJ.

Contract - Agreement to grant lease - Agreement subject to references being satisfactory and to the terms of a formal agreement to be prepared by lessor's solicitors - Agreement prepared by solicitors - Acceptance of terms by lessees - Refusal by lessors to grant lease - Claim for possession - Counterclaim for specific performance of agreement.

The plaintiffs, who were owners of a lease of premises, by a letter written by their agents, agreed to let the premises to the defendants subject in the usual way to your references being satisfactory, and to the terms of a formal agreement to be prepared by their [the plaintiffs'] solicitors. They also said that, if the references were approved, and the defendants paid a quarter's rent in advance, they would do certain work to the premises and would allow the defendants to enter into possession provided that the defendants gave an undertaking to vacate the premises if no agreement was entered into. The defendants paid the quarter's rent in advance and entered into possession of the premises. The plaintiffs' solicitors drew up a draft lease, which was sent to the defendants, who agreed the terms with the plaintiffs agents. A few days later the plaintiffs refused to proceed with the agreement to let the premises to the defendants and called on them to remove their machinery and to vacate the premises. As the defendants refused to do so, the plaintiffs brought an action to recover possession, and the defendants counterclaimed for specific performance of the agreement by the plaintiffs to give a lease of the premises to them:—

Held, that the letter of the plaintiffs agents did not serve to complete a binding contract, and that the true meaning of the words “subject to the terms of a formal agreement to be prepared” was that no contract was to exist between the parties unless and until a formal agreement had been entered into.

Decision of Atkinson J. [1942] 1 K. B. 251 reversed.

APPEAL from decision of Atkinson J.F1.

In July, 1941, the parties had been in negotiation with regard to the granting of a lease. On August 1, 1941, the defendants wrote making an offer and on the same day Messrs. Farebrother, Ellis & Co., the agents for the plaintiffs, wrote the following letter: “We are obliged by your letter of to-day's date, making an offer to take the first and second floors as inspected. We have submitted this to our clients who are prepared to proceed with the letting, subject in the usual way to your references being satisfactory and to the terms of a formal agreement to be prepared by their solicitors. We have to-day applied for the references, and as soon as these are approved by our clients we will ask you to let us have your cheque for one quarter's rent in advance, namely, 68 l. 15s., when our clients will give instructions for the necessary work to be put in hand, and will be willing for you to enter into possession, provided the rent is paid from the date you take it over and you give an undertaking to vacate when called upon, if no agreement is entered into.” The defendants paid the rent in advance and entered into possession. On August 13, the plaintiffs' solicitors sent to the defendants a draft of the agreement, but, after certain discussions had taken place, on August 28 the plaintiffs wrote saying that they were not willing to proceed with the agreement and requiring the defendants...

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