The Court warned against extending the ‘magic’ of the ‘subject to contract’ label into the realm of unilateral licences. The question was whether a landlord had granted licence to the tenant to carry out alterations. The letter relied on as constituting the licence was headed ‘subject to licence’ and the text of the letter gave consent subject to various conditions, including entry into a formal licence.
Held: A licence had been granted. The purpose of the suspensory condition ‘subject to contract’ in the context of negotiations is to avoid the other side seeking prematurely to conclude a contract by the acceptance of an offer so as to give rise to unintended legal consequences. In cases requiring a unilateral act the only question is whether that act has occurred.
Morritt LJ said: ‘I do not accept that it is legitimate to extend the principle . . from the field of bilateral negotiations to that of a unilateral act . . In cases requiring a unilateral act the only question is whether that act occurred . . In truth the heading ‘subject to licence’ added little to the condition expressed in the body of the letter and could not qualify the unambiguous expression of consent it contained. If it be necessary to attribute some meaning to the heading then it might serve to emphasise the degree of formality required so that the express condition for a formal licence should not be satisfied in correspondence or by some less formal method than a licence strictly so-called. But no such document was required by the terms of the leases . . ‘
and ‘The purpose of the suspensory condition ‘subject to contract’ in the context of negotiations is to avoid the other side seeking prematurely to conclude a contract by the acceptance of an offer so as to give rise to unintended legal consequences. In cases requiring a unilateral act the only question is whether that act has occurred. So in this case the only question is whether the letter of May 18th, 1993 was a consent as required by the lease. That is a question of the construction of the letter in the light of all of the surrounding circumstances. So regarded I have no doubt that the letter does express the consent required by the leases. It will be remembered that such consent may be temporary or revocable or qualified. This letter expresses consent in the clearest terms. The consent was qualified by the stipulation for a formal licence as stated in the body of the letter. For that document it would be necessary to have the drawing numbers referred to in the concluding passage. In truth the heading ‘Subject to Licence’ added little to the condition expressed in the body of the letter and could not qualify the unambiguous expression of consent it contained. If it be necessary to attribute some meaning to the heading then it might serve to emphasise the degree of formality required so that the express condition for a formal licence should not be satisfied in correspondence or by some less formal method than licence strictly so called. But no such document was required by the terms of the leases.’
Judges:
Morritt LJ, Sir John Balcombe and Beldam LJ
Citations:
[1996] EWCA Civ 933, [1997] 1 EGLR 37, (1997) 74 P and CR 377
Links:
Jurisdiction:
England and Wales
Cited by:
Cited – Confetti Records (A Firm), Fundamental Records, Andrew Alcee v Warner Music UK Ltd (Trading As East West Records) ChD 23-May-2003
An agreement was made for the assignment of the copyright in a music track, but it remained ‘subject to contract’. The assignor later sought to resile from the assignment.
Held: It is standard practice in the music licensing business for a . .
Cited – Aubergine Enterprises Limited v Lakewood International Limited CA 26-Feb-2002
A sought confirmation that it had successfully rescinded a contract for the purchase of a leasehold property from L. Either party was to be able to rescind, if consent to the assignment had not obtained before three days before completion. There . .
Lists of cited by and citing cases may be incomplete.
Contract, Landlord and Tenant
Updated: 03 November 2022; Ref: scu.140800