James is a Partner and Head of the Dispute Resolution team and primarily handles commercial…View Profile View all
The Court of Appeal has recently had to decide a case about an obligation in an agreement between a seller and the developer purchaser which required the developer to exercise all reasonable endeavours, and to act in good faith, in connection with planning requirements for the site.
Completion of the agreement was conditional upon the developer obtaining a planning permission which would permit deliveries to the site around the clock. Unfortunately, the planning permission when granted contained restrictions on the time that deliveries could be made. The sale agreement required the developer to appeal the planning permission to seek the removal of the onerous condition. That obligation to appeal was limited by certain conditions in the sale agreement. The developer made two successive appeals; it withdrew the second following expert advice that one of the relevant conditions could not be met. In those circumstances the developer terminated the agreement.
The first judge to hear the case found in the developer’s favour and the seller appealed. The Court of Appeal looked at the various issues including whether the developer was right to refuse to allow the seller to launch a further planning appeal itself; did that constitute a breach of the developer’s obligations to use all reasonable endeavours to procure an acceptable planning permission and to act in good faith in relation to its obligations under the agreement? The Court of Appeal decided that the developer was not in breach; the reasonable endeavours and good faith provisions of the agreement were curtailed by specific obligations in relation to appeals contained in the agreement. The Court decided that as the developer was not obliged to make a further appeal and the parties could not have intended that it should be obliged to allow the seller to do so.
This decision illustrates how detailed drafting can reduce disputes caused by the uncertainty surrounding the scope of endeavours and good faith obligations in agreements of this type.
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