Sudbrook Trading Estate v Eggleton [1983] 1 AC 444

Option for the purchase of leased property validly exercised


Four separate leases were made in relation to adjacent industrial premises. Each lease expired on 24 December 1997. Each lease contained an option for the lessees to purchase the premises upon the expiry of the leases. Upon the options being exercised, the lessors refused to appoint a valuer as required by the terms of the options.


At first instance, it was held that the options were valid and had been properly exercised. The Court of Appeal held that the parties had simply come to an agreement to agree and a court could not compel a party to appoint a valuer and, therefore, the options were unenforceable. The lessees appealed to the House of Lords.


The House of Lords allowed the appeal. Since a price was capable of being ascertained, a contract for the sale of the premises had been validly constituted between the lessor and lessee. The contract was for a sale of the premises at a fair and reasonable price upon the application of objective standards. The options had been validly exercised by the lessees and so the contracts for sale should be performed.  The mechanism for the ascertainment of the purchase price was a subsidiary and non-essential part of the contract. If the mechanism for the ascertainment of the purchase price broke down for whatever reason then the court was able to substitute its own valuation by ordering an inquiry into the fair value of the reversions (Talbot v Talbot [1968] Ch. 1).

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