The courts used to take a technical approach to the construction of notices, but the decision in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122; [1997] 25 EG 138 changed this. The position now is that notices must be clear and unambiguous, so that a reasonable recipient would be left in no doubt about as to the meaning of the notice. Whether a particular document constitutes a valid notice for the purposes of an agreement will, of course, still depend upon the contractual provisions under which the document is served. However, the courts will now also consider the matrix of facts in which a document is received and will ask themselves how a reasonable recipient would have understood the document.
The decision in Rennie v Westbury Homes (Holdings) Ltd [2007] EWHC 164 (Ch); [2007] PLSCS 30 is none the less surprising. The dispute turned on the status of a letter from a firm of solicitors requesting for information that would enable it to transfer a sum of money that it was expecting to receive in connection with the extension of an option agreement. The High Court decided that the letter constituted a valid notice of the buyer’s wish to extend the option agreement because, even though the letter focused upon the payment arrangements, a reasonable recipient would have understood its meaning: Lancecrest Ltd v Asiwaju [2005] EWCA Civ 117; [2005] 1 EGLR 40; [2005] 16 EG 146 applied.
The courts used to take a technical approach to the construction of notices, but the decision in Mannai Investment Co Ltd v Eagle Star Life Assurance Co Ltd [1997] 1 EGLR 57; [1997] 24 EG 122; [1997] 25 EG 138 changed this. The position now is that notices must be clear and unambiguous, so that a reasonable recipient would be left in no doubt about as to the meaning of the notice. Whether a particular document constitutes a valid notice for the purposes of an agreement will, of course, still depend upon the contractual provisions under which the document is served. However, the courts will now also consider the matrix of facts in which a document is received and will ask themselves how a reasonable recipient would have understood the document. The decision in Rennie v Westbury Homes (Holdings) Ltd [2007] EWHC 164 (Ch); [2007] PLSCS 30 is none the less surprising. The dispute turned on the status of a letter from a firm of solicitors requesting for information that would enable it to transfer a sum of money that it was expecting to receive in connection with the extension of an option agreement. The High Court decided that the letter constituted a valid notice of the buyer’s wish to extend the option agreement because, even though the letter focused upon the payment arrangements, a reasonable recipient would have understood its meaning: Lancecrest Ltd v Asiwaju [2005] EWCA Civ 117; [2005] 1 EGLR 40; [2005] 16 EG 146 applied. The validity of the notice was also in doubt for another reason. The buyer had the right to extend the option agreement at any time within the final year of the option period and, on payment of £20,000, the agreement was to be construed accordingly. It is well established that a buyer must comply with any conditions imposed by an option agreement when exercising an option. So, did the buyer’s failure to pay the requisite sum until the day after the option period had expired mean that the option period had not been validly extended? The judge ruled that the agreement did not impose any deadline by which the payment must be made, with the result that the buyer’s only obligation was to make the payment within a reasonable time. It seems that the draftsman should have stipulated that the payment was to accompany the buyer’s notice to extend the option, or should have specified the precise date upon which, or period within which, payment was required. It is interesting to compare the strict analysis of the wording in the contract with the liberal conclusion that the letter (which many would have read as being only indicative of the buyer’s intentions) constituted a valid notice exercising the buyer’s right to extend the option. This contrast in approach is an inevitable consequence of the decision in Mannai. However, practitioners will be surprised by the judge’s ruling that it is inherent in the objective nature of the Mannai test that a document that does not actually purport to be, and which was not intended by its sender to operate as such, may nevertheless constitute a binding notice. Allyson Colby is a property law consultant
