Background
Millen Homes held an option to buy land at East Hanningfield. It also entered into a conditional agreement with Inland Limited under which, if planning-related conditions were met before the end of the option period, Inland would become entitled to an assignment of the option. The agreement required Millen not to terminate the option agreement, whether by action or omission, and to take steps to ensure it remained in force.
Inland later entered administration and assigned its rights under the conditional assignment agreement to Hawridge. Millen did not serve the notice or pay the £5,000 fee needed to extend the initial option period beyond 13 June 2024. Hawridge claimed more than £2.5 million in damages, alleging breach of contract and a duty of care. Millen sought summary judgment or strike-out; Hawridge sought summary determination of contractual issues.
The Court’s Holding
Master Clark granted summary judgment for Millen on Hawridge’s contractual claim. Properly construed, the obligation in clause 5.2.2 not to terminate the option agreement and to take steps to keep it in force did not require Millen to exercise its separate contractual right to extend the option period. Failure to extend meant that the option period expired by effluxion of time; it did not terminate the option agreement by omission.
The court rejected Millen’s argument that the relevant agreement could not have been assigned to Hawridge. Hawridge relied on the assignment of Inland’s rights under the assignment agreement, not an assignment of the option agreement itself, so the option agreement’s restriction concerning assignment to Inland did not apply. Moreover, the incorporated commercial conditions had been modified to remove a prohibition on Inland transferring the benefit of the assignment agreement. The alleged duty-of-care claim was not struck out and remains to be determined.
Key Takeaways
- An obligation to keep an agreement “in force” does not necessarily require a party to extend it beyond its stated term.
- Expiry by effluxion of time is not, without more, termination by an omission.
- An assignee may retain standing under an assignment agreement even where the underlying land option contains a separate assignment provision.
Why It Matters
The decision illustrates the importance of expressing any obligation to renew or extend a land option in clear terms. Broad language requiring a party not to terminate an agreement will not readily be read as compelling it to incur the continuing operational and financial burdens of an extension.
It also distinguishes between rights under an option agreement and rights under a separate agreement for its future assignment, a distinction that can be decisive in disputes involving insolvency and subsequent assignments.