The court examined provisions in leases creating service charges. The disputed provision increased the service charge by 10% every year.
Held: Davis LJ discussed the thinking behind the clause: ‘Lack of correspondence between outlay and receipt is the almost inevitable consequence of such a clause if the parties have elected for a fixed charge formula. It has a similarity with a liquidated damages clause: it represents the parties’ estimate at the outset for the future with neither guarantee nor even expectation of entire coincidence with the eventual outcome. But the advantage is certainty. The parties know from the outset where they stand. Moreover, it is a surrounding circumstance legitimately to be taken into account here that the leases were made at a time of inflation – in some years, very significant inflation – which the parties, objectively and commercially speaking, could be expected to want to confront. They chose to do so by this particular formula of increase.’
Richards, Davis, Lloyd Jones LJJ
[2013] EWCA Civ 902
Bailii
England and Wales
Citing:
Cited – Prenn v Simmonds HL 1971
Backgroun Used to Construe Commercial Contract
Commercial contracts are to be construed in the light of all the background information which could reasonably have been expected to have been available to the parties in order to ascertain what would objectively have been understood to be their . .
At ChD – Arnold v Britton and Others ChD 3-Dec-2012
The parties disputed the effect of 5 versions of a clause in lease by the appellant to various lessees on a chalet park. . .
Cited by:
At CA – Arnold v Britton and Others SC 10-Jun-2015
Absurdity did not defeat a clear clause
A standard lease of plots on a caravan park, contained a provision which appeared to increase the rent by 10% in each year. The tenants argued that such a substantial increase could not have been intended.
Held: The tenants’ appeal failed . .
Lists of cited by and citing cases may be incomplete.
Landlord and Tenant
Updated: 23 November 2021; Ref: scu.513540