This case concerns a contract for the sale of a development site for the sum of £2.565 million between Sheffield City Council (SCC) and Scotfield Group Limited (SGL). The contract was assigned by SGL to Camstead Limited (CL), the second Defendant, during the course of the proceedings.
The contract included the following terms which became pivotal to the discussions in the case:
- SCC were to retain control over the development of the land, post-sale;
- the contract was conditional, meaning that it was subject to Satisfactory Planning Permission being granted; and
- there was an obligation on SGL to provide SCC with evidence of a "Building Contract" and if on the long stop date, that evidence had not been provided, the long stop date was to be extended until such evidence was provided.
Key issue – implied terms:
The key issue in this case was broadly agreed between the parties to be:
"Should a term be implied into the contract to the effect that the First Defendant (SGL) was obliged to enter into and/or to provide evidence of the Building Contract within a reasonable time of the contract having become unconditional?"
Other issues before the Court related to SCC's ability to terminate the contract, the validity of a notice to terminate served by SCC in 2021 and the validity of a notice to rectify a breach by SGL. Further details can be found at paragraph 26 of the judgment.
Position of the parties:
In relation to the key issue, SCC argued that it was "necessary to imply a term into the contract to give it business efficacy … because once the contract had become unconditional on the grant of Satisfactory Planning Permission, there was an obligation imposed on both parties to complete the contract pursuant to clause 24. Although there was that obligation to complete, a difficulty arose because pursuant to clause 24.5, the time for completion was suspended unless and until the First Defendant had provided evidence of the Building Contract."
SGL on the other hand, submitted that "there was no need to imply a term and indeed the implication of any term would be unfair. … any term would be inconsistent with the express terms of the contract … Clause 14.3 did not require the First Defendant to enter into a Building Contract. Indeed, it could not do so because one could never specify a start date. Clause 24 supplemented and complemented clause 14 in providing that completion shall not take place unless and until the First Defendant provided evidence of the Building Contract. As such, failure to comply with those provisions could never be classified as a substantial breach." SGL further asserted that "an amendment is not required by the implication of a term because the contract works without any term being implied and thus has commercial coherence".
Judgment:
The Judge found it was both possible and necessary to imply a term to give the contact practical and commercial coherence. Therefore, it required a term to be implied into the contract that the First Defendant was obliged, within a reasonable time after the contract became unconditional, to provide evidence of the Building Contract.
Upon considering the other issues in the case, the Judge found that the contract had in fact been terminated and brought to an end by SCC and that SCC were entitled to forfeit and retain the deposit paid by SGL under condition 10.2 of the Standard Commercial Property Conditions as incorporated into the contract.
This case serves as a reminder that if a party can establish a "lacuna" in the terms of a contract, the Court will step in to imply a term that provides business efficacy where necessary.
