Sudbrook Trading Estate Ltd v Eggleton [1983]

Court: House of Lords

Facts: Sudbrook Trading Estate Ltd (C) had four leases on adjacent industrial premises, each containing an option for the lessees to purchase the premises upon lease expiry. The purchase price was to be determined by a valuer appointed by the lessor (D), and it was stipulated to be fair and reasonable. Upon lease expiry, C sought to exercise the option, but D refused to appoint a valuer, arguing that the option clause was too vague and thus unenforceable as no price could be determined. The Court of Appeal deemed the option clause as an unenforceable "agreement to agree," ruling that the court could not compel the appointment of a valuer.

Issue: Whether the option clause was too uncertain to be enforceable due to D’s refusal to appoint a valuer.

Held: The House of Lords allowed the appeal, ruling that the agreement was enforceable. The machinery for fixing the price was considered a subsidiary part of the contract. The refusal to appoint a valuer did not render the agreement void, as the price was to be fair and reasonable, assessed by applying objective standards. The lessor's refusal to cooperate was deemed a self-induced frustration of the contract, which English law does not permit as a means to avoid obligations.

Key Judicial Statements:

Lord Diplock: The contract was for a sale at a fair and reasonable price assessed by objective standards, not a price fixed by a named individual applying subjective standards. The lessor's refusal to appoint a valuer constituted a breach of contract, not a valid reason for frustration. The lessor could not use its own breach to avoid the obligation of conveying the premises at a fair price.

Lord Fraser: When the option was exercised, it created a complete contract for sale. If the machinery for setting the price (i.e., valuers and an umpire) fails, the court can substitute alternative means to ascertain the price, provided it serves the contract’s main purpose.

💡 Leveluplaw: demonstrates that in contracts where pricing mechanisms involve objective standards, a party's refusal to cooperate does not render the contract void. Instead, courts may enforce the contract by substituting alternative mechanisms to fulfill its main purpose. This case highlights the principle that self-induced frustration cannot be used to avoid contractual obligations.